Louis Hotte

International trade with endogenous enforcement of property rights

We model the endogenous evolution of the de facto property rights regime and explore the impact of trade on de facto property rights regimes and on welfare. The model takes into account the dynamics of the stocks of natural resources, and the effect of trade on resource utilization. We show that the opening of trade can change the de facto property rights regime of an economy. Such changes may lead to a greater stock of resource, but are not always beneficial to society due to the enforcement costs. Thus, the opening of trade can be harmful.

Conflicts over Property Rights and Natural-Resource Exploitation at the Frontier

Competition for land at the frontier is analyzed by considering a game between a first settler and a contestant. Although the first settler is the legitimate owner of a plot of land, its remoteness from the governments administrative center makes it difficult to prove it. This creates incentives for a contestant to dispute his claims. Both contenders will expend resources in order to secure ownership. Due to transport costs, the more remote is a plot of land, the lower its output value; this tends to discourage appropriative activities. Land degradation is sometimes used as a substitute to appropriative activities. A lower discount rate may encourage land degradation.

Environmental regulation and trade openness in the presence of private mitigation

Acknowledging the differential ability of individuals to privately mitigate the consequences of domestic pollution for their health is essential for an understanding of their demands for regulation of the environment and of trade in dirty goods, and for analysis of the implications of these demands for equilibrium policy choices. In a small open economy with exogenous policy, we first explain how private mitigation at a cost results in an unequal distribution of the health consequences of pollution in a manner consistent with epidemiologic studies, and consequently how the benefits and costs of trade in dirty goods interact with choices concerning private mitigation to further polarize the interests of citizens concerning environmental stringency. The economy is then embedded in a broader political economy setting, and simulated to investigate the role of private mitigation in shaping political equilibria. We show that when citizens can choose between mitigating the health consequences of domestic pollution privately and reducing pollution through public policy, the same polarization of interests underlies equilibrium policy choices in both democratic and autocratic regimes.

Individual Protection Against Property Crime: Decomposing the Effects of Protection Observability

We revisit the question of the efficiency of individual decisions to be protected against crime for the cases of both observable and unobservable protection. We obtain that observable protection is unambiguously associated with a negative externality and that at the individual level, it has a deterrence effect but no payoff reduction effect. Unobservable protection has a global deterrence effect and is associated with a private payoff reduction effect but no private deterrence effect. A decrease in the global crime payoff is detrimental to a victim if protection is observable, while it is beneficial with unobservable protection. While protection has a positive diversion effect when observable, it has the equivalent of a negative diversion effect when unobservable.

On the Dual Nature of Weak Property Rights

In the natural-resource literature, conventional wisdom holds that weak property rights will cause a resource to be over-exploited. This is because weak property rights are typically perceived as a problem of input exclusion – or theft of un-extracted resources. We present evidence to the effect that weak property rights often take the form of contestable outputs – or output theft – and that this has an impact on resource use. We propose a model of resource use under generally weak property rights – or weak state presence – when resource users face the dual problem of input exclusion and output appropriation. We show that introducing the possibility that outputs be contested acts as an output tax, with the added twist that resource users effectively determine the tax level. This tax has a depressive effect on input use. Whether the resource is under- or over-exploited depends on the relative severity of output appropriation and input exclusion problems. Increasing enforcement measures against theft may lead to severe resource overuse. Efficiency considerations require to account not only for direct resource input use, but also for thieves’ efforts and gains as well as the costs of enforcement against theft and trespass.

On the Redistributive Impact of Privatizing a Resource under Imperfect Enforcement

We consider the redistributive effects of privatizing a resource previously exploited under free access. We assume that illegal extraction is punished but that the sanction is bounded by individuals wealth. First, we show that a segment of intermediate-wea lth individuals is the most adversely affected from the regime change, while the poorest segment is not only less severely affected, but may actually gain from it. Next, we show how the authorities may prefer to choose an intermediate enforcement level in order to maximize the political acceptability of the regime switch among the local community.

Political influence, economic interests and endogenous tax structure in a computable equilibrium framework: With application to the United States, 1973 and 1983 *

We consider the properties of a computable equilibrium model ofa competitive political economy in which the economic interestsof groups of voters and their effective influence on equilibriumpolicy outcomes can be explicitely distinguished and computed.The model incorporates an amended version of the GEMTAP taxmodel, calibrated to data for the United States for 1973 and1983. Emphasis is placed on how the aggregation of GEMTAPhouseholds into homogeneous groups affects the numericalrepresentation of interests and influence for representativemembers of each group.

Property Crime with Private Protection: A Market-for-Offenses Approach

We propose a market-for-offenses model of property crime, which explicitly accounts for protection expenditures among heterogeneous individuals. The crime equilibrium is modeled as a free-access equilibrium in which the match between criminals and victims equates the average returns to crime. We borrow from the literature on the economics of conflicts in order to define an appropriation function that combines the efforts of criminals with the protection efforts of the victims. The supply and demand for crime are endogenized taking into account incentives to participate in criminal activities and individual protection decisions. The effects of changes in public enforcement, redistribution policies and economic development are analyzed, as well as the distribution of the burden of crime among heterogeneous individuals.

Open Access vs. Restricted Access with Two Variable Factors: On the Redistributive Effects of a Property Regime Change

We consider the factor payment effects of a transition from open access to restricted access in the resource sector in the long-run, i.e., when both labor and capital are mobile between sectors. We show that the transition benefits (harms) the factor that is initially used more (less) intensively in the manufacturing sector relative to the resource sector. Our analysis introduces a dual approach used to compare equilibria between property regime types.

Environmental Conflict and Natural Resources

With a constant flow of news stories linking conflict with the control of natural resources, one is led to believe that resource abundance fosters conflict. And yet, many would argue that natural resources can be used to support peaceful and stable growth. There is also much evidence that instead links resource scarcity with conflict. Over the past 20 years or so, the application of new theoretical modeling techniques, along with the availability of richer data sets on conflict, has contributed great strides in untangling those links. The challenge has been (and remains) to identify risk factors that make conflict more likely in the presence of resources. This article summarizes the main concepts and findings. The author begins by highlighting the role of forceful appropriation as a means to acquire goods. A necessary parallel is then drawn between conflict economics and property right economics. Two fundamental risk factors internal to natural resources are underscored, nonreplicability and appropriability. Examples of external risk factors, such as trade openness and institutions, are considered with the help of three simple models representative of the economic approach to micro and macro conflicts. The models also illustrate how resource use is in turn affected by conflict, or even its mere anticipation.