Working Paper: NBER ID: w22701
Authors: A. Patrick Behrer; Edward L. Glaeser; Giacomo A.M. Ponzetto; Andrei Shleifer
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.
Keywords: Property Rights; Water Pollution; Regulation; Legal Frameworks
JEL Codes: H13; K11; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| subversion of justice by powerful polluters (Q53) | effectiveness of liability rules (K13) |
| subversion of justice by powerful polluters (Q53) | damages assessed against polluters (Q52) |
| court subversion (K40) | effectiveness of property rules (P14) |
| property rules (K11) | protection for property owners (P14) |
| many affected parties and bargaining failure (D74) | necessity of regulation (G18) |
| regulation (L51) | outcomes compared to property and liability rules (K13) |
| Clean Water Act (Q25) | improvements in water quality (Q25) |