Transaction Costs and the Value of Mining Claims
Land Economics, Vol. 77, No. 3, August 2001
Posted: 21 Jan 2002
Under the 1872 Mining Law, claimants can to acquire outright title to federal lands. Yet miners have not widely used this land-disposal feature, known as the mineral patent provision, since the early part of the century. In this paper I use a property rights framework to examine the relationship between transaction costs and the value of formal title to an asset. Specifically, I examine the incentives to acquire title to mining claims on federal lands. I argue that the benefits of title are a function of the costs of enforcing rights to unpatented claims. To examine this assertion, I construct a data set on patent activity and legal disputes for twelve western states covering the period 1882-1932. The data reveal a strong relationship between the transaction costs variables and the level of patent applications. The empirical results support the hypothesis that a decrease in the costs of enforcing rights to untitled claims led to a corresponding decrease in the value for full title.
JEL Classification: Q3, N5, K0
Suggested Citation: Suggested Citation