Payments for environmental services as an alternative to logging under weak property rights: The case of Indonesia

Decentralization reforms in Indonesia have led to local communities negotiating logging agreements with timber companies for relatively low financial payoffs and at high environmental cost. This paper analyzes the potential of payments for environmental services (PES) to provide an alternative to logging for these communities and to induce forest conservation. We apply a game-theoretical model of community-firm interactions that explicitly considers two stylized conditions present in the Indonesian context: (i) community rights to the forest remain weak even after decentralization, and (ii) the presence of logging companies interested in the commercial exploitation of the forest. Intuition may suggest that PES design should focus on those communities with the lowest expected payments from logging deals. However, we show that these communities may not be able to enforce a PES agreement, i.e., they may not be able to prevent logging activities by timber companies. Moreover, some communities would conserve the forest anyway; in these cases PES would not lead to additional environmental gains. Most important, the introduction of PES may increase a community's expected payoff from a logging agreement. A failure to consider this endogeneity in expected payoffs could lead to communities opting for logging agreements despite PES, simply allowing communities to negotiate better logging deals. Our results indicate that PES design is a complex task, and that the costs of an effective PES system could potentially be much higher than expected from observing current logging fees. Using data collected in Indonesia on actual logging fees received by communities, we illustrate how the theoretical results could be used in empirical analysis to guide PES design. Our results are likely to be useful in other cases where local people make resource use decisions but have weak property rights over these resources, and where external commercial forces are present. The results highlight the importance of understanding the details of the local context in order to design PES programs appropriately.     

A market without the 'right' property rights

While Vietnam's reforms provided some of the weakest legal private property rights amongst the transitions countries, cities like Ho Chi Minh City have booming domestic real estate markets. Interestingly, while most properties in 2001 did not have legal title, those on the market did advertise a variety of property rights claims. Employing a hedonic price model to analyse the pattern of prices at which sellers offer properties in Ho Chi Minh City, this study examines how this market values property rights. The findings show that multiple forms of property rights, enforced by highly decentralized state institutions, are operational in this market. Furthermore, legal title itself is not the most valuable form of property right. These findings suggest that the value of property rights emanates from where it is enforced within the particular institutional context of a market.     

The emergence of property rights enforcement in early trade: A behavioral model without reputational effects

The present article focuses on the conditions that allow governments to increase property rights protection because they expect enough income from such action. We develop a behavioral explanation, according to which the answer lies in the growth in the importance, size and wealth of merchant guilds in the medieval era in Western Europe as well as a somewhat surprising effect of volatile price structures. We add to prior research by showing that even uncoordinated embargo pressures among multiple guilds could get medieval rulers to offer high levels of property rights protection.     

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 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.     

Costly enforcement of property rights and the Coase theorem

We examine a setting in which property rights are initially ambiguously defined. Whether the parties go to court to remove the ambiguity or bargain and settle before or after trial, they incur enforcement costs. When the parties bargain, a version of the Coase theorem holds. However, despite the additional costs of going to court, other ex-post inefficiencies, and the absence of incomplete information, going to court may ex-ante Pareto dominate settling out of court. This is especially true in dynamic settings, where obtaining a court decision today saves on future enforcement costs. When the parties do not negotiate and go to court, a simple rule for the initial ambiguous assignment of property rights maximizes net surplus. A paper circulated under the same title and dated 6 March 2000 contained the basic structure examined in this paper, but did not develop many of the results reported here. For comments, we would like to thank participants at the WZB-CEPR contests conference and seminar audiences at the University of Southern California, the University of British Columbia, UC Davis, and UC Riverside.     

Conceptions of property rights and norms

The social norm literature in law and economics fails to account for the differences between the two major conceptions of property rights. The differences between the two conceptions affect people’s utility function by affecting how increases in property rights are perceived. This paper discusses how the modern, in rem, conception evolved from an older, in personam, conception; it also discusses how economics has absorbed the modern, in rem, conception. The paper demonstrates that if people do not perceive the benefits of modern property rights, they will follow their social norms if the government or planner imposes modern property rights on them. In the end, this allows one to make a fuller discussion of why norms economize information. This discussion has various consequences ranging from developmental economics to financial market economics and cannot be ignored.

产权界定、产权流动与产权维护

诺斯认为,有效率的产权具有三大激励功能:即降低费用、保证人们的预期收益和使个人的投资收益充分接近于社会收益,这对经济增长起着十分重要的作用。本文认为,要使产权功能真正发挥作用,需要有合理的产权界定、规范的产权流动和公平的产权维护,三者缺一不可。文章从整体观的角度讨论了落实这三者的重要意义和各自存在的问题,并提出了党政分开和政企分开是解决问题的关键。     

Fragmented property rights and royalty bargaining

We consider production by a firm that relies on the patent rights that are held by other actors. Before production can take place, bargains have to be struck with each patent holder over the royalty per unit produced. In the negotiations, a patent holder must be mindful of the fact that a large royalty will increase the product price and lower demand for the final product. Hence each patent holder would prefer to gain a large royalty at the expense of rivals. When the producer makes the first offer in an alternating offer framework, we analyze whether it should conduct negotiations sequentially with some grouping of patent holders or simultaneously. We demonstrate that the producer will prefer simultaneous negotiation. An individual patent holder would prefer to negotiate early with the producer, and then to see remaining rights holders negotiate simultaneously. A firm that holds several patents would want to negotiate royalties on each one sequentially and then have simultaneous negotiation of payments to other rights holders.     

The competitive enforcement of property rights in medieval Japan: The role of temples and monasteries

Medieval Japanese governments only haphazardly enforced claims to scarce resources. Necessarily, this presented landholders with a void. To obtain the enforcement they needed, many turned to institutions affiliated with the fractious Buddhist faith instead. Temples and monasteries enjoyed an exemption from tax on their lands and controlled an array of financial and human resources with which they could adjudicate and enforce claims to scarce resources. To obtain access to that exemption and those resources, landholders “commended” their rights in land to them, and paid them a share of the harvest. In exchange, the temples and monasteries exempted them from tax, adjudicated disputes internal to the estate and protected their estates against external threats. Effectively, the temples and monasteries competed in a market for basic governmental services.By helping to secure basic claims to property, the temples and monasteries helped to promote investment and growth; by competing against the government itself, they helped to forestall the crippling effect of a predatory monopolistic state.     

Spontaneous (non)emergence of property rights

The paper analyses preferences of private owners over the degree of property rights protection. It is shown that inequality in resource ownership and/or relative inefficiency of production technologies could make wealthier agents favour less than full protection of property rights. If such agents control the choice of a property rights regime, fully secured property rights will not emerge from the grassroots. This conclusion is consistent with the failure to create an efficient property rights system in Russia.     

Defining national property rights to a common property resource: The case of the West Bank aquifers

This article introduces a methodology to define Israeli and Palestinian property rights to the three aquifers straddling the Green Line between Israel and the West Bank, i.e. the Yarqon-Tanninim, Northern, and Nablus-Jenin aquifers. A set of procedures for determining a fair division of waters is described for the hypothetical planning year 2000. Following this, the calculated allocation of water rights is evaluated in terms of the projected over-all water consumption and supply balance for Israel and a Palestinian sovereign authority (PSA) for the year 2000. Finally, the article concludes with some thoughts on the relative merits of this methodology.     

Insecurity of property rights and social matching in the tenancy market

This paper shows that insecurity of property rights over agricultural land can have large efficiency and equity costs because of the way it affects matching in the tenancy market. A principal-agent framework is used to model the landlord's decision to rent when he takes into account the risk of losing the land to the tenant and when contract enforcement is decreasing in social distance with the tenant. These effects are quantified for the case of local land rental markets in the Dominican Republic. Results show that insecure property rights lead to matching in the tenancy market along socio-economic lines, severely limiting the size of the rental market and the choice of tenants for landlords, both with efficiency costs. Social segmentation reduces access to land for the rural poor, with high equity costs. Simulations suggest that improving tenure security would increase rental transactions by 21% and the area rented to the poor by 63%. Increased property rights security is hence beneficial not only to asset owners, but also to those with whom they might interact in the market.     

Endogenous growth and property rights over renewable resources

We study how different regimes of access rights to renewable natural resources – namely open access versus full property rights – affect sustainability, growth and welfare in the context of modern endogenous growth theory. Resource exhaustion may occur under both regimes but is more likely to arise under open access. Moreover, under full property rights, positive resource rents increase expenditures on manufacturing goods and temporarily accelerate productivity growth, but also yield a higher resource price at least in the short-to-medium run. We characterize analytically and quantitatively the model׳s dynamics to assess the welfare implications of differences in property rights enforcement.     

Legal positivism and property rights: a critique of Hayek and Peczenik

Scholars such as Friedrich Hayek and Aleksander Peczenik have criticized legal positivism for undermining constitutionalism and the rule of law, an implication of which is weakened private property rights. This conclusion is far from evident. First, I contend that legal positivism is compatible with a strong support for property rights. Second, the causal relationship between legal positivism and the degree to which property rights are applied and protected is analyzed. The main arguments for a negative relationship—that legal positivism centralizes and politicizes legislation and that it makes the legal culture servile in relation to the political sphere—are considered unconvincing.

Disagreement over the emergence of private property rights: alternative meanings, alternative explanations

This paper is an exercise in the history of thought, which compares Austrian and neoclassical theories of the emergence of private property rights, and examines, in part, the extent to which Austrians can be said to offer a commonly-agreed upon explanation that parallels Carl Menger's exemplary story of the emergence of money. We address the sources of disagreement (and apparent conflict) among emergence theorists in both schools. We try to show that some of the disagreement hinges on an unclear meaning of the term “emergence,” which is resolvable, while other sources of disagreement are fundamental at the methodological level. JEL Code B25, E40, E53     

Transaction costs and the property rights approach to the theory of the firm

The standard property rights approach is focused on ex ante investment incentives, while there are no transaction costs that might restrain ex post negotiations. We explore the implications of such transaction costs. Prominent conclusions of the property rights theory may be overturned: A party may have stronger investment incentives when a non-investing party is the owner, and joint ownership can be the uniquely optimal ownership structure. Intuitively, an ownership structure that is unattractive in the standard model may now be desirable, because it implies large gains from trade, such that the parties are more inclined to incur the transaction costs.     

“三位一体化”的产权交易模式研究

研究发现,协议转让、招投标和拍卖三种主要转让方式在我国国有产权交易实践中不是独立的、相互排斥的。相反,它们结合成具有前后继起性的“三位一体化”交易模式：三种转让本质上是一个交易的三个环节,具体推进到哪一步取决于交易的竞争程度。本文从产权供求双方的现实约束及相应的行为假定对该模式及其运作机理、特点作了解释,发现它是一个有效的交易模式,在此基础上,对由该模式下的非“价高者得”原则所推出的“国有资产流失论”进行分析,最后提出该模式需要进一步解决的问题。     

对企业国有产权交易投招标模式的分析

企业国有产权是我国国有资产的重要组成部分,规范企业国有产权转让行为,有利于加强企业国有产权交易的监督管理。现有监管体制下,可以拍卖、招投标、协议转让以及国家法律、行政法规规定的其他方式进行交易。针对实践中国有产权交易模式存在的问题,对投招标模式进行了分析,提出了交易程序中应注意的问题。