Natural-resource exploitation with costly enforcement of property rights

Louis Hotte ()

Oxford Economic Papers, 2005, vol. 57, issue 3, 497-521

Abstract: A model of resource exploitation when private ownership requires costly enforcement is developed. Enforcement costs are endogenized as the outcome of a game between a resource owner and illegal extractors. I find that two instruments are used to deter illegal extraction: policing efforts and purposeful 'overexploitation' of the resource. The latter works by reducing the returns from illegal activities. Hence, even with private ownership, the marginal product of a resource worker may be below his marginal product in alternative employment. Conditions are found for which at low wage rates, further wage reductions lower profits. Those conditions are necessary and sufficient for the existence of a range of low wages characterized by a free-access equilibrium. This may explain the more frequent prevalence of free access in less-developed countries. I show that higher resource prices will not lead to more free-access, but may lead to 'value destruction'. Copyright 2005, Oxford University Press.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpi020 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Natural-Resource Exploitation with Costly Enforcement of Property Rights (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:57:y:2005:i:3:p:497-521

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().