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Ownership Risk and the Use of Common-Pool Natural Resources

Jérémy Laurent-Lucchetti and Marc Santugini ()
Additional contact information
Marc Santugini: IEA, HEC Montréal, http://www.hec.ca/iea/

No 10-03, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: It has long been recognized that the quality of property rights greatly impacts the economic development of a country and the use of its natural resources. Since Long (1975), the conventional wisdom has been that ownership risk induces a firm to overuse the stock of a resource. However, the empirical evidence is mixed. In particular, Bohn and Deacon (2000) finds that weak property rights have an ambiguous effect on present extraction. We provide a theoretical model supporting these mixed observations in a common-pool resource environment. We show that if ownership risk includes a risk of expropriation in which the identities of the excluded firms are unknown ex ante, then the present extraction of all firms may decrease along with a higher risk of expropriation. The elasticity of demand for the resource is key in explaining the effect of ownership risk on present extraction.

Keywords: Common-pool resource; Expropriation; Extraction behavior; Ownership risk; Property rights; Tragedy of the commons. (search for similar items in EconPapers)
JEL-codes: D21 D23 D92 Q30 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-07, Revised 2011-05
New Economics Papers: this item is included in nep-env
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Journal Article: Ownership risk and the use of common-pool natural resources (2012) Downloads
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