[Publisher:] Institut für Weltwirtschaft (IfW) [Place:] Kiel [Year:] 1990
Kiel Working Paper No. 447
Consider a country possessing a specific production factor in fixed quantity, producing in combination with land a stream of services through time. Some of these services are consumed domestically. The bulk of it, however, is consumed world-wide. Despite the services the country provides to the world it does not earn any income from these exports. This is because it lacks a technology turning services produced into the exclusive property of the country. Possessing a sector which produces such a good, how can the country earn income from the services it provides? This is a stylised description of the problem faced by countries which host the world's rainforests. As determinants of the global climate rainforests provide a multitude of environmental services. Some of these services escape the home countries of forests, spill over abroad and are consumed there as a free lunch. In this sense, countries do not possess exclusive property rights over the forests they host. This global commonality of a national production factor creates a series of problems which endangers the environment.