Endogenous Property Rights Regimes, Common Pool Resources and Trade

Abstract

This paper analyzes the impact of trade on resource stocks through endogenously selected property rights regimes. We present a model that shows welfare can be maximized when a community degrades its resource stock under optimally selected property rights regimes after opening to trade. Results from a laboratory experiment show that labor allocations, property rights regimes and resource stock levels do not follow the optimal dynamic Nash equilibrium path. Instead a non-optimal dynamic equilibrium path is selected due to incorrect initial labor allocation and property rights regime choices.

Keywords: Resource Stock, Common Property Management, Property Rights

JEL Classification: Q56, Q2, C7, C9