On the Dual Nature of Weak Property Rights

University of Ottawa Economics Working Paper No. 1103E

31 Pages Posted: 7 Jun 2011

See all articles by Louis Hotte

Louis Hotte

University of Ottawa

Randy McFerrin

New Mexico State University - College of Home Economics

Douglas Wills

University of Washington, Tacoma - Department of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: April 12, 2011

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

Suggested Citation

Hotte, Louis and McFerrin, Randy and Wills, Douglas T., On the Dual Nature of Weak Property Rights (April 12, 2011). University of Ottawa Economics Working Paper No. 1103E. Available at SSRN: https://ssrn.com/abstract=1858753 or http://dx.doi.org/10.2139/ssrn.1858753

Louis Hotte (Contact Author)

University of Ottawa ( email )

Department of Economics
55 Laurier E.
Ottawa, Ontario K1N 6N5
Canada
+161 356 25800 1692 (Phone)
+161 356 25999 (Fax)

HOME PAGE: http://aix1.uottawa.ca/~lhott3/

Randy McFerrin

New Mexico State University - College of Home Economics ( email )

United States

Douglas T. Wills

University of Washington, Tacoma - Department of Business Administration ( email )

1900 Commerce Street, Box 358420
Tacoma, WA 98402-3100
United States
253-692-5626 (Phone)
253-692-4424 (Fax)

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