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Dynamic resource management under weak property rights: A tale of thieves and trespassers

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  • Rodriguez, Mauricio
  • Smulders, Sjak

Abstract

We study non-renewable resource extraction when institutions weakly protect the resource owner’s property rights. First, weak wealth protection exposes the stock in the ground to trespassing. Second, weak income protection exposes revenues from extraction to theft. In our dynamic framework with strategic interactions, the strength of wealth and income protection evolves over time. The weak protection of wealth results in excessive depletion due to the common pool externality. Anticipated changes in institutional strength further distort depletion. A resource user (i.e., owner or trespasser) is less rapacious when she anticipates favorable institutional changes. However, a given change in institutional strength may be favorable for some but detrimental for another resource user. Under these conflicting interests, the anticipation of better wealth protection might result in less efficient extraction. More generally, our results indicate that unstable institutions limit the benefits derived from resource ownership and thus constitute a challenge to the efficient management of non-renewable resource riches in weakly institutionalized economies.

Suggested Citation

  • Rodriguez, Mauricio & Smulders, Sjak, 2022. "Dynamic resource management under weak property rights: A tale of thieves and trespassers," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
  • Handle: RePEc:eee:jeeman:v:112:y:2022:i:c:s0095069622000110
    DOI: 10.1016/j.jeem.2022.102622
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    Cited by:

    1. Rodriguez Acosta, Mauricio, 2016. "Essays in political economy and resource economic : A macroeconomic approach," Other publications TiSEM 1e39ef1b-43a2-4f95-892c-6, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    Depletion; Institutions; Non-renewable resources; Weak property rights;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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