Natural-Resource Exploitation with Costly Enforcement of Property Rights
This paper proposes a model of natural-resource exploitation when private ownership requires costly enforcement activities. For a given wage rate, it is shown how enforcement costs can increase with labor's average productivity on a resource site. As a result, it is never optimal for the site owner to produce at the point where marginal productivity equals the wage rate. It may even be optimal to exploit at a point exhibiting negative marginal returns. An important parameter in the analysis is the prevailing wage rate. When wages are low, further decreases in the wage rates can reduce the returns from resource exploitation. At sufficiently low wages, positive returns can be rendered impossible to achieve and the site is abandoned to a free-access exploitation. The analysis provides some clues as to why property rights may be more difficult to delineate in less developed countries. It proposes a different framework from which to address normative issues such as the desirability of free trade with endogenous enforcement costs, the optimality of private decisions to enforce property rights, the effect of income distribution on property rights enforceability, etc.
|Date of creation:||1997|
|Date of revision:|
|Contact details of provider:|| Postal: CP 6128, Succ. Centre-Ville, Montréal, Québec, H3C 3J7|
Phone: (514) 343-6540
Fax: (514) 343-5831
Web page: http://www.sceco.umontreal.ca
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Field, Barry C, 1989. "The Evolution of Property Rights," Kyklos, Wiley Blackwell, vol. 42(3), pages 319-45.
- Jon G. Sutinen & Peder Andersen, 1985. "The Economics of Fisheries Law Enforcement," Land Economics, University of Wisconsin Press, vol. 64(4), pages 387-397.
- Cowell, F A, 1981. "Taxation and Labour Supply with Risky Activities," Economica, London School of Economics and Political Science, vol. 48(192), pages 365-79, November.
- Clarke, Harry R. & Reed, William J. & Shrestha, Ram M., 1993. "Optimal enforcement of property rights on developing country forests subject to illegal logging," Resource and Energy Economics, Elsevier, vol. 15(3), pages 271-293, September.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
- Friedman, David & Sjostrom, William, 1993. "Hanged for a Sheep--The Economics of Marginal Deterrence," The Journal of Legal Studies, University of Chicago Press, vol. 22(2), pages 345-66, June.
- George J. Stigler, 1974.
"The Optimum Enforcement of Laws,"
in: Essays in the Economics of Crime and Punishment, pages 55-67
National Bureau of Economic Research, Inc.
- Anderson, Terry L & Hill, Peter J, 1975. "The Evolution of Property Rights: A Study of the American West," Journal of Law and Economics, University of Chicago Press, vol. 18(1), pages 163-79, April.
- Cohen, Jon S. & Weitzman, Martin L., 1975. "A Marxian model of enclosures," Journal of Development Economics, Elsevier, vol. 1(4), pages 287-336, November.
- Milliman, Scott R., 1986. "Optimal fishery management in the presence of illegal activity," Journal of Environmental Economics and Management, Elsevier, vol. 13(4), pages 363-381, December.
- James A. Brander & M. Scott Taylor, 1995.
"International Trade and Open Access Renewable Resources: The Small Open Economy Case,"
NBER Working Papers
5021, National Bureau of Economic Research, Inc.
- James A. Brander & M. Scott Taylor, 1997. "International Trade and Open-Access Renewable Resources: The Small Open Economy Case," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 526-52, August.
- Robin Brooks & Michael Murray & Stephen Salant & Jill C. Weise, 1999.
"When Is the Standard Analysis of Common Property Extraction under Free Access Correct? A Game-Theoretic Justification for Non-Game-Theoretic Analyses,"
Journal of Political Economy,
University of Chicago Press, vol. 107(4), pages 843-858, August.
- Brooks, R. & Controneo, J. & Murray, M. & Salant, S., 1995. "When is the Standard Analysis of Common Property Extraction Under Free Access Correct? -- A Game - Theoretic Justification for Non Game-Theoretic Analyses," Papers 95-10, Michigan - Center for Research on Economic & Social Theory.
- Helsley, Robert W. & Strange, William C., 1994. "Exclusion and the private enforcement of property rights," Journal of Public Economics, Elsevier, vol. 53(2), pages 291-308, February.
- Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
- Lasserre, Pierre, 1994. "Protection décentralisée des droits de propriété, police et justice," L'Actualité Economique, Société Canadienne de Science Economique, vol. 70(2), pages 177-189, juin.
- Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
- International Monetary Fund, 1997. "Corruption and the Rate of Temptation; Do Low Wages in the Civil Service Cause Corruption?," IMF Working Papers 97/73, International Monetary Fund.
- Frank A. Cowell, 1990. "Cheating the Government: The Economics of Evasion," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262532484, December.
- Ehrlich, Isaac, 1973. "Participation in Illegitimate Activities: A Theoretical and Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 521-65, May-June.
- Cheung, Steven N S, 1970. "The Structure of a Contract and the Theory of a Non-exclusive Resource," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 49-70, April.
When requesting a correction, please mention this item's handle: RePEc:mtl:montde:9720. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sharon BREWER)
If references are entirely missing, you can add them using this form.