NBER Working Papers by Christopher Costello

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Working Papers

January 2015Property Rights, Regulatory Capture, and Exploitation of Natural Resources
with Corbett Grainger: w20859
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 indiv...
May 2011The Value of Secure Property Rights: Evidence from Global Fisheries
with Corbett A. Grainger: w17019
Property rights are commonly touted as a solution to common pool resource problems. But in practice the security of these property rights varies substantially owing to differences in design. In fisheries, the design of individual transferable quotas (ITQs) varies widely; the consequences of these design differences on economic outcomes has not been studied. To test whether the security of these property rights affects asset values, we compile a unique dataset to examine the relationship between the exclusivity of property rights and the dividend price ratios for ITQs. We find evidence that stronger property rights lead to higher asset values and lower dividend price ratios in ITQ fisheries. This pecuniary effect of property rights security informs the current policy debate on the design of...
September 2010Unitization of spatially connected renewable resources
with Daniel T. Kaffine: w16338
Spatial connectivity of renewable resources induces a spatial externality in extraction. We explore the consequences of decentralized spatial property rights in the presence of spatial externalities. We generalize the notion of unitization - developed to enhance cooperative extraction of oil and gas fields - and apply it to renewable resources which face a similar spatial commons problem. We find that unitizing a common pool renewable resource can yield first-best outcomes even when participation is voluntary, provided profit sharing rules can vary by participant.

Published: Kaffine Daniel T & Costello Christopher, 2011. "Unitization of Spatially Connected Renewable Resources," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-31, March. citation courtesy of

Overcoming the common pool problem through voluntary cooperation: the rise and fall of a fishery cooperative
with Robert T. Deacon, Dominic P. Parker: w16339
We analyze a seldom used, but highly promising form of rights-based management over common pool resources that involves the self-selection of heterogeneous fishermen into sectors. The fishery management regime assigns one portion of an overall catch quota to a voluntary cooperative, with the remainder exploited as a commons by those choosing to fish independently. Data from an Alaska commercial salmon fishery confirm our model's key predictions, that the co-op would facilitate the consolidation of fishing effort, coordination of harvest activities, sharing of information and provision of shared infrastructure. We estimate that the resulting rent gains were at least 25%. A lawsuit filed by two disgruntled independents led to the co-op's demise, an outcome also predicted by our model. Our an...

Published: Robert Deacon, Dominic Parker, and Christopher Costello. Reforming fisheries: lessons from a self-selected cooperative. Journal of Law and Economics , 56:83–125, 2013.

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