Abstract
This paper explores the long–run development of an economy with a traditional sector based on common-pool resource-use, a modern, resource-independent sector with fixed entry costs, and an imperfect capital market. We show theoretically that introducing resource-use regulations increases incomes in the traditional sector and that this can trigger a development process with labor reallocation to the modern sector. Allowing trade of resource-use rights, or distributing resource-use rights unequally, broadens the scope for development.
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