We explore a dynamic commons problem and assess the welfare consequences of access to capital markets. The commons has a high intrinsic rate of return but its fruits cannot be secured by individual agents. Capital market access allows resources to be held securely and intertemporally transferred, but at a lower rate of return. In a two period model, we completely characterise symmetric consumption and extraction behaviour in four environments: un- der a strategic and a competitive equilibrium concept, and with and without market access. Strategic equilibria dominate competitive ones: while agents disagree over how to divide the resource, all would prefer it to be larger; the strategic concept allows them to anticipate returns to their conservation. As the number of agents becomes infinite, the strategic outcome converges to the competitive; as the number of agents falls to one, it converges to the planner's. Market access has a positive effect on welfare owing to its con- sumption and extraction smoothing properties and a negative effect owing to its creation of an outside option to the commons, encouraging its depletion. A sufficient condition for autarky to dominate market access for some levels of communal endowment is that the world market discount factor exceed the subjective discount factor. Multiple equilibria may arise: these result from market access, not the equilibrium concept. Key words: commons, capital markets, Washington Consensus, property rights
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Department of Economics, University of Birmingham in its series Discussion Papers with number
05-19.
Find related papers by JEL classification: C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply (the Commons)
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Aaron Tornell & Philip R. Lane, 1999.
"The Voracity Effect,"
American Economic Review,
American Economic Association, vol. 89(1), pages 22-46, March.
[Downloadable!] (restricted)
Erwin H. Bulte & Richard D. Horan & Jason F. Shogren, 2003.
"Elephants: Comment,"
American Economic Review,
American Economic Association, vol. 93(4), pages 1437-1445, September.
[Downloadable!]
Michael Kremer & Charles Morcom, 2003.
"Elephants: Reply,"
American Economic Review,
American Economic Association, vol. 93(4), pages 1446-1448, September.
[Downloadable!]