Anticipatory Effects of Regulation in Open Access

Ellen Bruno and Nick Hagerty

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: We study the regulation of open-access resources under long implementation horizons. Our theoretical model clarifies when and how future regulation creates either an anticipatory decline or perverse incentives to accelerate extraction (a "Green Paradox'"). Then, we evaluate the early effects of a major groundwater regulation in California that does not yet bind. We assemble new data and compare within pairs of neighboring agencies that face varying restrictions on extraction. Differences in future regulation do not affect measures of water-intensive investments or groundwater extraction today. The absence of anticipatory response in either direction can be explained by high private discount rates.

Keywords: Social; and; Behavioral; Sciences (search for similar items in EconPapers)
Date: 2023-08-18
New Economics Papers: this item is included in nep-env and nep-reg
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