On the Dual Nature of Weak Property Rights

Abstract

In the natural resource literature, conventional wisdom holds that weak property rights will cause a resource to be over-exploited. This is because weak property rights are typically perceived as a problem of input exclusion. In this paper, we first present evidence to the effect that weak property rights often take the form of contestable outputs -- or output theft -- and that this has an impact on resource use. We then propose a theoretical model of natural resource use under generally weak property rights -- or weak state presence -- when resource users face the dual problem of input exclusion and output appropriation. We show that introducing the possibility that outputs can be contested acts as an output tax, with the added twist that resource users effectively determine the level of the tax. This tax has a depressive effect on input use. As a result, whether the resource is under- or over-exploited in equilibrium will depend on the relative severity of output appropriation and input exclusion problems when property rights are generally weak.

Keywords: Natural Resources, Property Rights, Trespass, Theft, Over-Exploitation, Under-Exploitation

JEL Classification: K11, K42, Q2, N50, O13