Common Property Resources and New Entrants: Uncovering the Bias and Effects of New Users

Steven Smith

Journal of the Association of Environmental and Resource Economists, 2016, vol. 3, issue 1, 1 - 36

Abstract: Small, stable, and homogeneous user groups are expected to achieve better outcomes within common-property resource regimes. Empirical identification of these effects, however, remains difficult because user group characteristics are unlikely random across systems and data of communally managed resources are hard to come by, exposing analyses to omitted variable bias. To address this issue, I collect a panel data set of 50 communal irrigation systems in New Mexico. With annual observations from 1984 to 2011, I test for the impact of group size, new users, and group heterogeneity using fixed effects, controlling for a number of time-invariant factors that would otherwise be omitted. I find robust results demonstrating that larger user groups experience worse outcomes. However, if I forgo the fixed effects and mimic cross-sectional analysis, I identify a result smaller in magnitude and statistical significance, suggesting that omitted variable bias can account for some of the weak evidence in the existing literature.

Date: 2016
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