No. 6/2013: Endogenous Growth and Property Rights Over Renewable Resources
Abstract
We analyze the general-equilibrium effects of alternative regimes of access rights over
renewable natural resources - namely, open access versus full property rights - on the
pace of development when economic growth is endogenously driven by both horizontal
and vertical innovations. Resource exhaustion may occur under both regimes but is
more likely to arise under open access. Under full property rights, positive resource
rents increase expenditures and temporarily accelerate productivity growth, but also
yield a higher resource price at least in the short-to-medium run. We characterize
analytically the welfare effect of a regime switch induced by a failure in property rights
enforcement: switching to open access is welfare reducing if the utility gain generated
by the initial drop in the resource price is more than offset by the static and dynamic
losses induced by reduced expenditure.
JEL Classification: O11, O31, Q21
Keywords: Endogenous growth, Innovation, Renewable Resources, Sustainable Development, Property Rights