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We study how the strength of property rights to individual extractive firms affects a regulator's choice over exploitation rates for a natural resource. The regulator is modeled as an intermediary between current and future resource harvesters, rather than between producers and consumers, as in the traditional regulatory capture paradigm. When incumbent resource users have weak property rights, they have an incentive to pressure the regulator to allow resource extraction at an inefficiently rapid rate. In contrast, when property rights are strong, this incentive is minimized or eliminated. We build a theoretical model in which different property right institutions can be compared for their incentives to exert influence on the regulator. The main theoretical prediction - that stronger individual property rights will lead the regulator to choose more economically efficient extraction paths - is tested empirically with a novel panel data set from global fisheries. Exploiting the variation in timing of catch share implementation in our panel data, we find that regulators are significantly more conservative in managing resources for which strong individual property rights have been assigned to firms; this is especially pronounced for resources that have been overexploited historically.

Zonder onderwerpscode: economie

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We study the timing-of-extraction problem facing a decentralized mine owner when extraction entails environmental damage. As expected, when the environmental damage from mining is known, the socially optimal timing will depend on the magnitude of the damage relative to these costs in the rest of the world. But when environmental damage is uncertain, and these costs are revealed over time, a quasi-option value arises. We show that even if expected environmental costs are identical to those in the rest of the world, any uncertainty over these costs will cause the social planner to optimally delay mining until better information arrives. We show conditions under which it is optimal to postpone the mining decision indefinitely, and conditions when it is optimal to postpone only for a finite duration. The analysis leverages a crucial observation that distinguishes the non-renewable resource problem from the traditional quasi-option value framework. In the traditional framework, the presence of an irreversible investment and uncertainty can help nudge the decision maker to preserve an option, but it by no means implies the decision maker should always preserve the option. In contrast, for a non-renewable resource model, the arbitrage condition underpinning the Hotelling rule suggests that in the absence of uncertainty, the marginal mine owner is completely indifferent between mining immediately and at any point in the future. Thus, for our problem, any uncertainty will convince her to defer the mining decision.

Zonder onderwerpscode: economie

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The hedonic pricing method is one of the fundamental approaches used to estimate the economic value of attributes that affect the market price of an asset. In environmental economics, such methods are routinely used to derive the economic valuation of environmental attributes such as air pollution and water quality. For example, the Ricardian approach is based on a hedonic regression of land values on historical climate variables. Forecasts of future climate can then be employed to estimate the future costs of climate change. This extensively-applied approach contains an important implicit assumption that current land markets ignore current climate forecasts. While this assumption was defensible decades ago (when this literature first emerged), it is reasonable to hypothesize that information on climate change is so pervasive today that markets may already price in expectations of future climate change. We show how to account for this with a straightforward empirical correction (called the Forward-Looking Ricardian Approach) that can be implemented with readily available data. We apply this empirically to agricultural land markets in the United States and find evidence that these markets already are accounting for climate change forecasts. Failing to account for this would lead a researcher to understate climate change damages by 36% to 66%.

Zonder onderwerpscode: economie