Conservation Contracts and Political Regimes
Bard Harstad and
Review of Economic Studies, 2017, vol. 84, issue 4, 1708-1734
This article provides a flexible model of resource extraction, such as deforestation, and derives the optimal conservation contract. When property rights are “strong” and districts are in charge of extracting their own resources to get revenues, conservation in one district benefits the others since the reduced supply raises the sales price. A central authority would internalize this positive externality and thus conserve more. When property rights are instead weak and extraction is illegal or costly control, conservation in one district increases the price and thus the profit from illegally depleting the resource in the other districts. The externality from conservation is then negative, and centralization would lead to less conservation. We also derive the optimal conservation contract, and we explain when the principal, who values conservation, benefits from contracting with the districts directly even when contracting with a central authority would have led to more conservation, and vice versa.
Keywords: Deforestation; Resource extraction; Conservation; Contracts; Crime displacement; Centralization; Decentralization; Climate change; REDD; PES (search for similar items in EconPapers)
JEL-codes: D78 D86 F53 Q54 (search for similar items in EconPapers)
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Working Paper: Conservation Contracts and Political Regimes (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:84:y:2017:i:4:p:1708-1734.
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Review of Economic Studies is currently edited by Thomas Chaney, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Kurt Mitman, Francesca Molinari, Katrine Loken and Elias Papaioannou
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