Private Property and Economic Efficiency: A Study of a Common-Pool Resource

Abstract

The British Columbia halibut fishery provides a natural experiment of the effects of "privatizing the commons." Using firm-level data from the fishery 2 years before private harvesting rights were introduced, the year they were implemented, and 3 years afterward, a stochastic frontier is estimated to test for changes in technical, allocative, and economic efficiency. The study indicates that (1) the short-run efficiency gains from privatization may take several years to materialize and can be compromised by restrictions on transferability, duration, and divisibility of the property right; (2) substantial long-run gains in efficiency can be jeopardized by preexisting regulations and the bundling of the property right to the capital stock; and (3) the gains from privatization are not just in terms of cost efficiency but include important benefits in revenue and product form.

Source: Grafton, R.Q., Squires, D., and K.J. Fox. 2000. “Private property and economic efficiency: a study of a common-pool resource.” Journal of Law and Economics, 43(2): 679-713.

For more information, please contact: Dale.Squires@noaa.gov