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Securing Property Rights

Author

Listed:
  • Ponzetto, Giacomo
  • Behrer, A. Patrick
  • Glaeser, Edward
  • Shleifer, Andrei
Abstract
A central challenge in securing property rights is the subversion of justice through legal skill, bribery, or physical force by the strong—the state or its powerful citizens—against the weak. We present evidence that undue influence on courts is a common concern in many countries, especially among the poor. We then present a model of a water polluter whose discharges contaminate riparian properties belonging to multiple owners, and we compare property rules, liability rules, and regulation from the efficiency viewpoint. When the polluter can subvert the assessment of damages, property rules are preferred to liability rules when there are few parties and bargaining is feasible, but they excessively deter efficient pollution when bargaining between many parties fails. Regulation that enforces partial abatement may be preferred to either of the extreme rules. Our model helps explain the evolution of the legal treatment of water pollution from property rules to liability rules to regulation. An empirical analysis of water quality in the U.S. before and after the Clean Water Act shows that the effects of regulation are consistent with several predictions of the model.

Suggested Citation

  • Ponzetto, Giacomo & Behrer, A. Patrick & Glaeser, Edward & Shleifer, Andrei, 2016. "Securing Property Rights," CEPR Discussion Papers 11545, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11545
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    More about this item

    Keywords

    Property rights; Court subversion; Liability rules; Property rules; Regulation; Water pollution;
    All these keywords.

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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