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General Equilibrium Tragedy of the Commons

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Abstract

Many poor economies depend on open access resources for their livelihoods. Households in resource-based economies allocate their time and other factors between resource extraction and other activities. As a result, factors may shift from one sector to another as marginal returns change. This has two important implications. First, it implies potentially strong linkages between resource and non-resource sectors. Second, it means that unmanaged resources cause inefficient allocations of inputs across all sectors, and the effects of resource management spill into other sectors. We construct a local general equilibrium model that accounts for inputs that over-allocate to an open access resource and create a general equilibrium tragedy of the commons. This model describes resource rent dissipation more adequately in economies with mobile factors than a model with slowly dissipating rents. Perfectly mobile factors dissipate rent in every period, but endogenous wages cause labor and capital allocations to change with the resource stock. We use the model to illustrate medium-run impacts of a limit on capital in an artisanal fishery in Honduras. Simulation results reveal that fishery management has economy-wide impacts on prices and wages. Managers in developing countries thus should consider these linkages when implementing policies to conserve fish stocks.

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Notes

  1. Without the assumption of first-degree homogeneity (i.e., with decreasing returns to scale), a residual claimant would collect an additional value.

  2. It is possible that some inputs not in the resource sector are less productive when inputs are over-allocated to resource extraction. As inputs exit the resource sector, productivity can increase for one input.

  3. With optimal factor allocation, the resource would receive a payment equal to its (dynamic) opportunity cost so while this is referred to as resource rent, it really refers to a factor payment required for efficiency (Manning and Uchida 2016).

  4. The term RAS is used because of common notation for the procedure. Specifically the procedure starts with a matrix, \(A_{0}\) and produces a new matrix \(A_{1}\) by solving for row and column multipliers, \(r_i\) and \(s_j\) subject to the restriction that corresponding row and column totals are equal. In matrix notation, this can be expressed as \(A_{1}=R{A}_{0}S\), giving it the name, RAS.

  5. Analysis of the sensitivity to this assumption can be made available upon request. The intrinsic growth rate affects the magnitude of management impacts but all qualitative results hold for intrinsic growth rates between 0.2 and 0.8.

  6. Nationwide, Honduras had a per-capita income of US$1,880 in 2010; see IFAD, Rural Poverty in Honduras, http://www.ruralpovertyportal.org/country/home/tags/honduras.

  7. In this setting, PROLANSATE is charged with monitoring the national parks, including fishing that occurs within park boundaries, but cannot legally enforce park rules. They report violations to appropriate authorities.

  8. Results derived from finding the cap level that achieves maximum physical yield or rent at the new steady state.

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Authors and Affiliations

  1. Colorado State University, Clark Building, 1172 Campus Delivery, Fort Collins, CO, 80523, USA

    Dale T. Manning

  2. University of California-Davis, Davis, CA, USA

    J. Edward Taylor & James E. Wilen

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  1. Dale T. Manning
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  2. J. Edward Taylor
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  3. James E. Wilen
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Correspondence to Dale T. Manning.

Appendix: Modified Social Accounting Matrix for Northern Honduras Fishing Communities

Appendix: Modified Social Accounting Matrix for Northern Honduras Fishing Communities

See Table 8.

Table 8 Tela Bay area communities social accounting matrix (Millions of Lempiras)
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Manning, D.T., Taylor, J.E. & Wilen, J.E. General Equilibrium Tragedy of the Commons. Environ Resource Econ 69, 75–101 (2018). https://doi.org/10.1007/s10640-016-0066-7

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