spillovers investment incentives and the property rights theory of the firm this paper examines the property rights theory of the firm when a manager s relationship specific investment can be partially appropriated by the owner of an asset even if cooperation breaks down the investments of non owners may then be devalued but are seldom wholly lost to the owner with such spillovers the outside option principle can be incorporated into the grossman hart moore framework without implying that ownership demotivates enriched predictions on the determinants of integration emerge

control rights in complex partnerships this paper develops a theory of the allocation of authority between two players who are in a complex partnership that is a partnership which produces impure public goods we show that the optimal allocation depends on technological factors the parties valuations of the goods produced and the degree of impurity of these goods when the degree of impurity is large control rights should be given to the main investor irrespective of preference considerations there are some situations in which this allocation is optimal even if the degree of impurity is very low as long as one party s investment is more important than the other party s if the parties investments are of similar importance and the degree of impurity is large shared authority is optimal with a greater share going to the low valuation party if the importance of the parties investments is similar but the degree of impurity is neither large nor small the low valuation party should receive sole authority we analyze an extension in which side payments are infeasible we check for robustness of our results in several dimensions such as allowing for multiple parties or for joint authority and apply our results to interpret a number of complex partnerships including those involving schools and child custody jel d02 o23 h41 l31

achieving sustainability and development through collective action an empirical analysis of the impact of the bore pool sharing program on farm incomes and crop choices summary repeated droughts in agriculture have promoted intensive reliance upon groundwater resources thereby exacerbating the already stressed groundwater reservoir situations all across the globe this has also resulted in increased inequality among farmers by allowing those with better physical assets such as borewells to extract water at the cost of less affluent farmers as a response bore pool sharing collective arrangements were introduced in some parts of india with the intention of slowing down the rate of groundwater depletion and helping improve the livelihoods of the worst affected farmers such arrangements work through promoting collective management of groundwater resources by providing critical and timely irrigation to rain fed crops and through dis incentivizing the cultivation of high water consuming crops we investigate the impact of bore pool sharing programs on crop incomes and cropping patterns of the participating households in south india a probit 2sls model and propensity score matching method are used to evaluate the impact of such programs while controlling for self selection biases results indicate that farmers participation in bore pool sharing collectives is positively associated with their crop incomes however contrary to expectation the share of high water intensive crops also increases with participation in addition share of water intensive crops is higher for a collective group with a higher ratio of bore wells to number of participating households finally farmers within the pool with multiple past failed bore well sinking attempts tend to extract more water thereby threatening the sustainability of the groundwater as well as the livelihoods of the farming community

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

unforeseen contingencies and incomplete contracts we scrutinize the conceptual framework commonly used in the incomplete contract literature this literature usually assumes that contractual incompleteness is due to the transaction costs of describing or of even foreseeing the possible states of nature in advance we argue however that such transaction costs need not interfere with optimal contracting i e transaction costs need not be relevant provided that agents can probabilistically forecast their possible future payoffs even if other aspects of the state of the nature cannot be forecast in other words all that is required for optimality is that agents be able to perform dynamic programming an assumption always invoked by the incomplete contract literature the foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate moreover we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality however even if renegotiation is allowed the result still remains valid provided that parties are risk averse

institutions and environmental governance a reconceptualization abstract this article presents the conceptual revisions needed to extend the new institutional approach to environmental governance from its current local and international domains of application to all governance solutions including national environmental and natural resource use policies and multi level governance solutions that are increasingly used to address global environmental change the article suggests that environmental governance is best understood as the establishment reaffirmation or change of institutions to resolve conflicts over environmental resources it also explains why the choice of these institutions is a matter of social justice rather than of efficiency the article suggests a way to understand formal and state centered governance solutions as forms of collective ownership not unlike common property the article demonstrates how institutional analysis can gain resolution by looking at the functional and structural tiers organization of governance functions and formulation of key institutional rules as key aspects of the design of governance institutions

information gathering transaction costs and the property rights approach the property rights approach to the theory of the firm suggests that ownership structures are chosen in order to provide ex ante investment incentives while bargaining is ex post efficient in contrast transaction cost economics emphasizes ex post inefficiencies in the present paper a party may invest and acquire private information about the default payoff that it can realize on its own inefficient rent seeking can overturn prominent implications of the property rights theory in particular ownership by party b may be optimal even though only the indispensable party a makes an investment decision

noncooperative bargaining hostages and optimal asset ownership this paper re examines the effect of asset ownership on investment decisions for a joint relationship in the absence of contracts on investment levels it obtains some results which contradict findings by sanford j grossman oliver d hart and john moore in particular it finds that the loss of ownership of an asset may increase the asset loser s investment incentive the difference between this paper and those authors papers stems from the different interpretations of the roles of the threat point and outside options in bargaining this paper also clarifies the role of relationship specific investments as a cause of integration copyright 1998 by american economic association

some notes on the misuse of classic writings in economics on the subject of common property abstract this paper aims to show how many economists have misunderstood the issues and language concerning the commons first they confuse the noun common property with the process of free and unregulated access second they explain the disappearance of common property resources as an unavoidable consequence of individual economic rationality this process supposedly is based on adam smith s use of selfishness but clearly is a misinterpretation of his basic writings ironically smith s writings which in toto advocate great legal political and moral restraint in economic action are most commonly used to advance opposite ends given that planet earth may be considered a common property the clarification and proper use of common property issues is of the utmost importance

the management of irrigation systems how to evoke trust and avoid prisoner s dilemma abstract the performance of canal irrigation systems depends partly on trust by farmers in the good faith and abilities of irrigation officials in india this trust is typically lacking there is instead a prisoners dilemma type syndrome of anarchy under the canals in which farmers lack the confidence that if they refrain from taking water out of turn they will get water on time and officials lack the confidence that if they work conscientiously to deliver the water on time farmers will refrain from rule breaking in east asia this syndrome of irrigation anarchy scarcely exists the reasons for the difference are partly to do with agro climatic conditions but they are also related to policy relevant variables of physical design and organizational arrangements within the constraints of agro climatic conditions features of east asian design and organization might usefully be transferred to indian conditions including break point reservoirs irrigation scheduling and monitoring separation of construction organization from operations and maintenance organization and catchment based operating agencies with their own revenue base

from unemployed to entrepreneur the role of the absolute bequest motive abstract using the british household panel survey this paper finds that inheritance has a concave effect on the hours worked by male entrepreneurs receiving an inheritance increases the labor supply of unemployed male entrepreneurs however this effect becomes smaller for higher inheritances

optimal ownership of public goods reconsidered consider a non governmental organization ngo that can invest in a public good should the government or the ngo own the public project in an incomplete contracting framework with split the difference bargaining besley and ghatak 2001 argue that the party who values the public good most should be the owner we demonstrate the robustness of their insight when the split the difference rule is replaced by the deal me out solution our finding is in contrast to the private good results of chiu 1998 and de meza and lockwood 1998 who show that the optimal ownership structure crucially depends on whether the split the difference rule or the deal me out solution is used

an inquiry into power and participatory natural resource management decentralised environmental governance based on community participation is increasingly replacing top down natural resource management there is increasing awareness however that such mechanisms might fail to ensure effective participation by all stakeholders and be prone to producing and or perpetuating power inequalities against this backdrop we claim that power should be positioned at the centre of analyses of natural resource management in this paper we provide a taxonomy of positions to analyse participatory decision making in natural resource management we operationalise this framework to analyse two failures of participatory natural resource management in turkey focusing on reasons for failure and the role of power asymmetries our results are based on case studies comprising in depth interviews focus groups and a survey administered to 944 individuals we conclude that participatory mechanisms are highly unlikely to bring democratic and equitable outcomes unless power relations are addressed at both institutional and local levels copyright oxford university press

common pool resources and contextual factors evolution of a fishermen s cooperative in calcutta abstract the cpr school has successfully rebutted hardin s pessimistic tragedy of the commons model however in recent years critics have focussed on the inward orientation and lack of contextual analysis characterising the writings of the cpr school oakerson a model for the analysis of common property problems working paper r86 13 workshop in political theory and policy analysis indiana university 1986 and ostrom governing the commons cambridge cambridge university press 1990 have detailed the list of variables that have to be studied to understand the mechanics of collective action however these factors are internal to the community recent critics point out that the actions of individual agents are also influenced by the alternatives embedded outside the system these variables are collectively labelled contextual factors in our paper we have analysed the case of a fishermen s cooperative in the calcutta metropolitan district to show how the historic and economic context shapes targets of resource users and affects the feasibility of alternative courses to achieve the target by determining opportunity and transaction costs of actions this indicates the importance of contextual factors in explaining the formation and evolution of the resource regime

government versus private ownership of public goods there has been a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services in recent years with an increasing trend toward contracting out to the private sector and public private partnerships this paper analyzes how ownership matters in public good provision we show that if contracts are incomplete then the ownership of a public good should lie with a party that values the beneets generated by it relatively more this is true regardless of whether this party is also the key investor or other aspects of the technology

design principles for managing coastal fisheries commons in present day japan abstract ostrom 1990 challenged the traditional belief that commons management inevitably requires state ownership or privatization and instead established the notion of user self governance this notion a third policy option for managing the commons entails little or no state involvement under this notion ostrom developed eight design principles to which self governing institutional arrangements adhere while the role of the state is minimal this article seeks to establish whether design principles characterize such institutional arrangements when the role of the state is accommodated explicitly within the principles drawing on a case study of present day management of japan s community based coastal fisheries commons our study shows that the design principles can better characterize self governing institutional arrangements when the state adopts a pro user self governance role that provides strategic support for users but neither takes ownership of the commons nor participates in engineering the institutional arrangements

finite lifetimes and growth abstract in this paper we study the long run growth property of overlapping generations models it is shown that in one sector models with convex technologies the asymptotic growth rate must be zero this results because the young do not have sufficient income to purchase a large capital stock thus a policy of income redistribution to the young can generate growth even if financed by income taxation additionaly it is shown that two sector models and one sector models with nonconvex technologies are consistent with growth

the outside option threat point and nash bargaining solution abstract one issue on whether in using the nash bargaining solution outside options should be treated as constraints or threat point payoffs is whether and for how long taking outside options will refrain players from reverting to bargaining

the emergence of cooperation among egoists this article investigates the conditions under which cooperation will emerge in a world of egoists without central authority this problem plays an important role in such diverse fields as political philosophy international politics and economic and social exchange the problem is formalized as an iterated prisoner s dilemma with pairwise interaction among a population of individuals results from three approaches are reported the tournament approach the ecological approach and the evolutionary approach the evolutionary approach is the most general since all possible strategies can be taken into account a series of theorems is presented which show 1 the conditions under which no strategy can do any better than the population average if the others are using the reciprocal cooperation strategy of tit for tat 2 the necessary and sufficient conditions for a strategy to be collectively stable and 3 how cooperation can emerge from a small cluster of discriminating individuals even when everyone else is using a strategy of unconditional defection

socio ecological explanations for crowding out effects from economic field experiments in southern africa abstract economic and psychological literature mentions three conditions under which the crowding out effect of pro social behaviour is likely to occur and to crowd out citizens moral obligations to behave co operatively i use a framed field experiment on joint extraction from a common pool resource cpr where the crowding out effect has already been reported before in combination with the trust game carried out in farming communities of namibia and south africa to replicate these conditions the research design and the cross cultural setting enable to explicitly control for these effects the results of the experiments support that the crowding out effect depends on the nature of the external intervention controlling vs supportive external intervention the degree of participants self determination high vs low self determination in the group a society s norms of trust and reciprocity high vs low trust within the society the results imply that outside regulations aiming to conserve natural resources risk worsening the situation when neglecting democratic legitimization as well as local community norms

rural forest management in sierra leone the role of economic in equality in facilitating collective action while significant theoretical developments have been made in the research on common pool resources heterogeneity remains a contested issue focusing on economic inequality one particular aspect o

water allocation under distribution losses comparing alternative institutions abstract the distribution of water resources is characterized by increasing returns to scale distribution links water generation to its end use standard economic analysis overlooks the interaction among these micro markets generation distribution and end use we compare water allocation when there is market power in each micro market these outcomes are compared with benchmark cases social planning and a competitive business as usual regime simulations suggest that institutions with market power in generation and end use generate significantly higher welfare than the distribution monopoly and the competitive regime however if the policy goal is to maximize the size of the grid a distribution monopoly is preferred

public versus private ownership quantity contracts and the allocation of investment tasks abstract the government wants a certain good or service to be provided should the required assets be publicly or privately owned or should a partnership be formed building on the incomplete contracting approach we argue that the initially specified quantity of an ex ante describable basic good can have important effects on investment incentives which has been neglected in the literature so far we also study how the tasks of investing in quality improvements and cost reductions should be assigned we show how the optimal contracts and governance structures depend on the exogenous parameters of the model such as the nature of the investments and the parties bargaining powers

does asset ownership always motivate managers outside options and the property rights theory of the firm this paper studies the grossman hart moore ghm property rights approach to the theory of the firm under alternating offers bargaining when managers can pursue other occupations while negotiating over the division of the gains from cooperation the ghm results obtain if taking the best alternative job terminates bargaining outcomes are very different sometimes an agent with an important investment decision should not own the assets he works with sometimes independent assets should be owned together sometimes strictly complementary assets should be owned separately

nature of human capital technology and ownership of public goods abstract besley and ghatak 2001 show that a public good should be owned by the agent who values the public good the most irrespective of technological factors in this paper we relax their assumptions in a natural way by allowing the agents to be indispensable and we show that the relative valuations are not the sole determinant of an optimal ownership structure but also the nature of human capital and technology matter

common property and collective action in economic development abstract a fundamental issue in many ldcs is the degree to which natural resource mismanagement is caused by common property arrangements this view has led to widespread attempts to privatize forests rangelands and water resources many of these efforts have failed to stop overuse and have contributed to inequality in resource distribution this paper seriously questions this approach and describes a number of reasons why common property may continue to be both efficient and equitable complementing and combining with private rights in a way consistent with the resource endowments of village economies a theoretical approach is outlined showing that the tragedy of the commons is an unsatisfactory model of common property an alternative model is presented together with a call for research into institutional alternatives in resource management

motivation crowding in environmental protection evidence from an artefactual field experiment abstract this paper examines how motivation crowding and social image affect environmental conservation decisions an artefactual field experiment conducted in bolivia is used to reproduce the trade off between individual and social benefits in natural resource use and test the effect of non monetary and non regulatory incentives on pro social behavior for environmental conservation the results show the presence of a social norm prescribing positive contribution towards environmental protection and that external incentives have heterogeneous effects on pro social behavior depending on how they influence reputation and self image the experimental results differ from those of analogous experiments conducted in the laboratory and are instead consistent with those from field experiments on common pool resource management this fact suggests caution in generalizing conclusions reached in the laboratory to different settings and populations

the management of common property resources collective action as an alternative to privatisation or state regulation can locally based collective action be a viable way to manage common property resources many writers on collective action and common property are sweepingly pessimistic about the ability of the people who face problems of common property to organize sustainable patterns of use for themselves this paper shows with reference to prisoners dilemma garett hardin s tragedy of the commons and mancur olson s logic of collective action that the analytical basis for this pessimism is weak in many situations of village based common property resource use there can thus be no general presumption that the collective action route to common property resource management will fail any more than there can be a general presumption that it will work the paper suggests a number of general factors to do with the characteristics of the resources the user group and group state relations on which chances of success depend

challenges for economic policy in sustainable management of marine natural resources the sustainable management of marine natural resources presents particular challenges to the managers of those resources while such management has typically been based on biological considerations it is argued that this has resulted in overexploitation and destruction of important marine assets in industries such as fishing and tourism consequently it is concluded that other approaches are needed with the use of economic concepts and management tools particularly relevant at the same time the human welfare outcomes of the application of various policy instruments must be carefully considered while biological information is critical to the formulation and implementation of successful management regimes it is concluded that the application of economic instruments will become more attractive to resource managers with these instruments underpinned by consideration of property rights and an appropriate allocation of economic rents a greater focus on these economic matters will take resource managers further in the direction of sustainable management of increasingly scarce marine resources the conclusions in the paper are supported by various case studies from fisheries and tourism 2001 elsevier science b v all rights reserved

coordination versus prisoners dilemma implications for international cooperation and regimes the study of political institutions in general and international cooperation in particular has been beneficially influenced by the prisoners dilemma pd game model but there is a mistaken tendency to treat pd as representing the singular problem of collective action and cooperation by relaxing the assumptions of 2 2 games and developing an alternate model of the coordination game i show how some cooperation problems have very different properties from those found in pd the analytical results of the two games are compared across several important dimensions number of strategies available number of iterations of the game numbers of players and the distribution of power among them the discussion is illustrated with specific problems of international cooperation and the implications of alternative cooperation problems for the formation and performance of international regimes are explored the basic solutions for pd and coordination have divergent ramifications for the institutionalization stability and adaptability of regimes and for the role of hegemony in the international system however the coordination model does not replace the pd model but complements and supplements it as a way to understand the diversity of political institutions these results are widely applicable to areas of politics beyond international relations

government versus private ownership of public goods the role of bargaining frictions abstract the government and a non governmental organization ngo can invest in the provision of a public good who should be the owner of the public project in an incomplete contracting model in which ex post negotiations are without frictions the party that values the public good most should be the owner regardless of technological aspects however under the plausible assumption that there are bargaining frictions the optimal ownership structure depends on technological aspects and on the parties valuations we show that the differences between incomplete contracting models with public goods and private goods are thus smaller than has previously been thought

governance of the commons a role for the state the paper examines property regimes and common pool resources using examples and case studies the relative merits of private community and state based rights are detailed the insights from the case studies and an analysis of institution costs provide a tentative framework for understanding the role of the state in the governance of the commons

economic growth with finite lifetimes abstract finite lifetimes do not preclude sustained growth with a convex technology when agents are finitely lived and formulate their bequeathing decisions in terms of an absolute bequest motive in this model the presence of government debt adversely affects the equilibrium rate of growth of the capital stock

growth with unintended bequests abstract in an overlapping generations model with finite lifetimes sustained growth is possible if there is a positive risk of death a redistribution occurs when non altruistic parents leave unintended bequests to their children

property relations and economic development the other land reform abstract continued concern for development has led to the suggestion that private property rights should be created to stimulate economic development this suggestion derives from an incomplete understanding of the property relations on the public domain lands in the arid tropics and from a confusion of cause and effect between property and economic productivity a model of the private public boundary in land is developed that challenges the view that wealth would increase if land at the extensive margin were privatized the various types of property regimes in land are defined and explained