Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/145054
Authors: 
Rodriguez, Mauricio
Smulders, Sjak
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper 6019
Abstract: 
Using a dynamic framework with strategic interactions, we study the management of a non-renewable natural resource when property rights are generally weak. Under generally weak property rights both the resource stock and the revenues from exploiting it are imperfectly protected, due to trespassing and theft respectively. Trespassing and theft affect the legitimate owner’s extraction decision: extracting the resource today protects the stock against trespassing but exposes the revenues to theft. Moreover, in an evolving institutional setting, the anticipation of a change in the strength of property rights further distorts the extraction decision: e.g., if the owner anticipates stronger property rights in the future, extraction is delayed. Our results indicate that the depletion of the resource is decreasing in the intensity of theft. In addition, when the owner and the trespassers are affected by theft, the depletion of the resource is below (above) the social optimal level if the intensity of theft is high (low).
Subjects: 
depletion
institutions
non-renewable resources
regime shift
weak property rights
JEL: 
K42
P48
Q32
Q38
Document Type: 
Working Paper

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