Securing Property Rights
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.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. We are grateful to Alejandro Ponce from the World Justice Project for providing us with their data, and especially to Joseph Shapiro for his data on water pollution. We are grateful to Abhijit Banerjee, Lucian Bebchuk, Kevin Chen, Oliver Hart, Louis Kaplow, Robbie Minton, Yusuf Neggers, Jesse Shapiro, Henry Smith, Ilya Somin, Dan Svirsky, Gabriel Unger, and the referees of this journal for extremely helpful advice. Ponzetto acknowledges financial support from the Centre de Recerca en Economia Internacional (CREI), through the European Research Council (ERC), under the European Union’s Horizon 2020 Programme, Grant Agreement 714905 (“Citizens, Institutions and Globalization”), the Spanish Ministry of Economy and Competitiveness (grants RYC-2013-13838 and SEV-2015-0563) and the Government of Catalonia (grant 2014 SGR 830 and CERCA program).
A. Patrick Behrer
I have received speaking fees from organizations that organize members that invest in real estate markets, including the National Association of Real Estate Investment Managers and the Pension Real Estate Association.
A. Patrick Behrer & Edward L. Glaeser & Giacomo A. M. Ponzetto & Andrei Shleifer, 2021. "Securing Property Rights," Journal of Political Economy, vol 129(4), pages 1157-1192.