Capitalizing property rights insecurity in natural resource assets

Abstract

Property rights are commonly touted as a solution to common pool resource problems. In practice, however, the security of property rights over natural resources varies sub- stantially, which may affect returns to ownership as well as asset values. We examine theoretically the capitalized asset market effects of weakened property rights to natural resources. We then assemble a unique dataset of global 'sheries to examine empirically how differences in property right strength affect market outcomes. Consistent with our theoretical predictions we and significant asset market capitalization of insecurity arising from: (1) ownership disputes, (2) illegal extraction from resource stocks, and (3) the possibility of government revocation of rights. Overall, these results suggest important pecuniary effects of weakened property rights to natural resources.