Property Rights, Regulatory Capture, and Exploitation of Natural Resources

Christopher Costello, Corbett Grainger

NBER Working Paper No. 20859
Issued in January 2015
NBER Program(s):Environment and Energy Economics, Public Economics, Political Economy

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 individual property rights will lead the regulator to choose more economically efficient extraction paths - is tested empirically with a novel panel data set from global fisheries. Exploiting the variation in timing of catch share implementation in our panel data, we find that regulators are significantly more conservative in managing resources for which strong individual property rights have been assigned to firms; this is especially pronounced for resources that have been overexploited historically.

download in pdf format
   (907 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20859

Published: Christopher Costello & Corbett A. Grainger, 2018. "Property Rights, Regulatory Capture, and Exploitation of Natural Resources," Journal of the Association of Environmental and Resource Economists, vol 5(2), pages 441-479.

Users who downloaded this paper also downloaded* these:
Grainger and Costello w17019 The Value of Secure Property Rights: Evidence from Global Fisheries
Price w20870 Using Field Experiments to Address Environmental Externalities and Resource Scarcity: Major Lessons Learned and New Directions for Future Research
Levinson and O'Brien w20914 Environmental Engel Curves
Sachs and Warner w5398 Natural Resource Abundance and Economic Growth
Costello and Kolstad w21325 Mining and Quasi-Option Value
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us