Securing Property Rights

NBER Working Paper No. 22701

Issued in September 2016, Revised in July 2020

NBER Program(s):Law and Economics, Political Economy



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.

Acknowledgments and Disclosures

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22701

Users who downloaded this paper also downloaded* these: