Securing Property Rights

91 Pages Posted: 3 Oct 2016 Last revised: 9 Apr 2021

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Giacomo A. M. Ponzetto

CREI - Universitat Pompeu Fabra

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2016

Abstract

A central challenge in securing property rights is the subversion of justice through legal skill, bribery, or physical force by the strong—the state or its powerful citizens—against the weak. We present evidence that undue influence on courts is a common concern in many countries, especially among the poor. We then present a model of a water polluter whose discharges contaminate riparian properties belonging to multiple owners, and we compare property rules, liability rules, and regulation from the efficiency viewpoint. When the polluter can subvert the assessment of damages, property rules are preferred to liability rules when there are few parties and bargaining is feasible, but they excessively deter efficient pollution when bargaining between many parties fails. Regulation that enforces partial abatement may be preferred to either of the extreme rules. Our model helps explain the evolution of the legal treatment of water pollution from property rules to liability rules to regulation. An empirical analysis of water quality in the U.S. before and after the Clean Water Act shows that the effects of regulation are consistent with several predictions of the model.

Suggested Citation

Glaeser, Edward L. and Ponzetto, Giacomo A. M. and Shleifer, Andrei, Securing Property Rights (September 2016). NBER Working Paper No. w22701, Available at SSRN: https://ssrn.com/abstract=2846937

Edward L. Glaeser (Contact Author)

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Andrei Shleifer

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