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The commons with capital markets

Author

Listed:
  • Colin Rowat

    (University of Birmingham)

  • Jayasri Dutta

    (University of Birmingham)

Abstract

We explore commons problems when agents have access to capital markets. The commons has a high intrinsic rate of return but its fruits cannot be secured by individual agents. Resources transferred to the capital market earn lower returns, but are secure. In a two period model, we assess the consequences of market access for the commons' survival and welfare; we compare strategic and competitive equilibria. Market access generally speeds extinction, with negative welfare consequences. Against this, it allows intertemporal smoothing, a positive effect. In societies in which the former effect dominates, market liberalisation may be harmful. We reproduce the multiple equilibria found in other models of competitive agents; when agents are strategic, extinction dates are unique. Strategic agents generally earn their surplus by delaying the commons' extinction; in unusual cases, strategic agents behave as competitive ones even when their numbers are small.

Suggested Citation

  • Colin Rowat & Jayasri Dutta, 2004. "The commons with capital markets," GE, Growth, Math methods 0412002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpge:0412002
    Note: Type of Document - pdf; pages: 30. Department of Economics, University of Birmingham working paper 05-01
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/ge/papers/0412/0412002.pdf
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    References listed on IDEAS

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    Cited by:

    1. Jayasri Dutta & Colin Rowat, 2004. "The Road to Extinction: Commons with Capital Markets," GE, Growth, Math methods 0412001, University Library of Munich, Germany.
    2. Giorgio Fabbri & Silvia Faggian & Giuseppe Freni, 2018. "Spatial resource wars: A two region example," Working Papers hal-01762471, HAL.
    3. Alvarez-Cuadrado, Francisco & Van Long, Ngo, 2011. "Relative consumption and renewable resource extraction under alternative property-rights regimes," Resource and Energy Economics, Elsevier, vol. 33(4), pages 1028-1053.
    4. Rahmi İlkılıç, 2011. "Networks of common property resources," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 47(1), pages 105-134, May.

    More about this item

    Keywords

    commons; capital markets; Washington Consensus; property rights;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices

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