We consider the redistributive effects of privatizing a resource previously exploited under free access. We assume that illegal extraction is punished but that the sanction is bounded by individuals' wealth. First, we show that a segment of intermediatewealth individuals is the most adversely affected from the regime change, while the poorest segment is not only less severely affected, but may actually gain from it. Next, we show how the authorities may prefer to choose an intermediate enforcement level in order to maximize the political acceptability of the regime switch among the local community.
This may explain the more frequent prevalence of free access in lessdeveloped countries. I show that higher resource prices will not lead to more free-access, but may lead to "value destruction".
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