Rent Capture Research Articles

Maximization of equilibrium utility vs minimization of resources in the urban equilibrium

We study welfare and the role of absentee landlords’ rent capture in one of the building blocks of urban economics: the monocentric city model. If only a fraction (but not all) of the absentee landlords’ land rents is captured and then redistributed, the market outcome minimizes resource usage but does not maximize residents’ utility. Therefore, when the utility-maximizing planner is unable to implement full taxation of land rents, she would prefer to intervene in the market outcome, while a planner minimizing resources would not. This difference implies that policy prescriptions crucially depend on the chosen welfare function (utility vs resources) and the land rent taxation rate.

The Devil and Florentino: Specters of Petro-Populism in Venezuela

AbstractScholarship on the political economy of natural resources in the Global South has often relied on the concept of the “resource curse” to explain the negative features of extractive economies and their alleged tendency to promote rent capture at the expense of national sovereignty and development. Such theories link the behavior of social actors to an excess of “unearned income,” with little reference to the concrete forms of political and cultural mediation that reproduce this structure of growth. This article explores the role of the devil symbol in populist discourse in Venezuela and how this spectral figure comes to mediate subaltern consciousness. Tracing the origins of this image to colonialism and efforts to grasp the dynamics of the modern petrostate, the analysis shows how use of this symbol to mediate the forecast transition from a rentier to a productive economy has given workers in a state enterprise a potent set of signs to articulate opposition to unjust labor conditions. Venezuelan leaders have deployed figures drawn from local folklore to divide society into two competing power blocs. Yet, while these discourses are effective at forging coalitions and justifying specific reallocations of oil wealth, they do not obviate the tensions of this transition, and a counternarrative using these same figures has arisen in response. The article concludes with an analysis of parallels between global theories of the resource curse and local Venezuelan iterations of this discourse as well as a discussion of the role of translation in theories of culture and modernity.

Reassembling the politics of “Green” urban redevelopment in East Garfield Park: A Polanyian approach

Spotlighting a “green building” project in Chicago (East Garfield Park), this paper explores the various cultural, geographical, and topological factors that serve to pluralize land commodification pathways. Building on the scholarship on rent capture, I re-assemble the politics of green gentrification in East Garfield Park in order to lay bare the dynamic interactions between structure (e.g. financialization of urban space), agency (e.g. expression of needs, purposes, interests), and spatial materiality (e.g. landscapes of built environment). My approach draws on Polanyian geographies, focusing in particular on plural social agencies, the impact of spatial infrastructural configurations on local politics, and the role of narrative/script-making in land development. The resulting conversation entails thicker criticism of municipal planning practices that fail to challenge the foundational assumptions of land market and property economy. Moreover, a number of implications arise from the performative political possibilities of spatial infrastructure: while broader economic structures may constrain the agency of diverse actants, spatial landscapes can nevertheless prove enabling for transformative value politics, with competing narratives on “what is the best use for the land” defying a singular ontology of land as “real-estate-land.”

Allocating budget in developing countries, the need to fight corruption: evidence from Sub-Saharan African countries

This paper highlights the need to fight corruption in developing economies to ensure a better allocation of public resources in a context of institutional failure with the discretionary power of budgetary authorities. The study uses a panel of 48 Sub-Saharan African countries by combining several databases (WDI, WGI, SPEED BASE DATA and PWT), estimate by generalized moment method in system, the bias-corrected estimation linear dynamic panel data [6] and the type of error correction (Driscoll–Kraay). The results indicate that the phenomenon of corruption in the form of rent capture has two effects on public resources. One effect is linked to the level of public spending and the other to the distribution of public resources. Thus, corruption leads to an increase in the overall level of public spending. Corruption reduces spending on education, mining and communications, but increases spending on the military, health and transport. The study recommends that political leaders in developing countries strengthen and rigorously enforce anti-corruption laws, and raise public awareness of the underground economy.

One step forward, two steps back? Shifting accumulation strategies in the lithium production network in Chile

The global race for critical minerals for the energy transition is triggering manifold discourses and initiatives in resource-rich countries regarding how to take advantage of the moment. From conventional accumulation strategies based on the capture of resource rents to more ambitious strategies seeking to move forward in the value chain, resource peripheries are in a decisive conjuncture. While the literature discussing the development and embeddedness of battery production networks in mineral-rich countries is a solid starting point, this article seeks to examine how the contingent position of mineral-rich states in the production network is the outcome of internal and external struggles that define its accumulation strategy. For such purpose, this contribution examines the making and unmaking of accumulation strategies based on lithium extraction in Chile, the country with the world´s largest reserves. The results show that a pendular movement between the strategy of exporting lithium brine at a large scale to appropriate resource rents and the development of value-added products in the country has undermined the development of the lithium value chain in Chile. Conclusions indicate that it is crucial to define a transversal and sustainable strategy that allows the country to take advantage of the energy transition.

True insights or ticking boxes? Rapid assessment of rights‐based management in artisanal fisheries

AbstractRights‐based fisheries management (RBFM) seeks to create market incentives to reduce competition, avoid overexploitation, and increase economic efficiency. Particularly for artisanal fisheries, however, assumptions of RBFM may not be met and its use needs to be carefully considered. This study applies an existing tool (SEASALT) to evaluate the strength of RBFM based on attributes of security, exclusivity, fish mortality, scale, responsibility, limitations, and transferability. Results for 17 fisheries in Mexico show a positive (nonsignificant) relationship between the strength of RBFM and stock status, and no effect on prices or landed value. Real‐world fisheries governance systems are much more complex than the simple linkages between attributes implied in SEASALT, but results highlight pre‐existing monitoring and enforcement capacity as essential for successful RBFM. Transitions to RBFM may strengthen this capacity, but likely cannot create it where it does not already exist. Based on our findings, RBFM strategies may benefit from group quotas with limited transferability to avoid negative social outcomes from consolidation or rent capture by intermediaries; this could potentially build on the latent capacity of traditional community associations common in many artisanal fisheries.

Pressure Groups and Rent Capture: How Effective Are Public Employment Policies: The Case of Gabon

In developing countries, and more specifically in the franc zone economies, the weight of the public sector seems to be preponderant, both in a situation where the State is a direct actor in the face of pressure groups and in a situation where it is an arbitrator between pressure groups. 
 
 From a theoretical model supported by an empirical verification, whose assumptions are based on the Gabonese economy, we wanted to know in what terms this problem arises in a rent economy in which the State has a strong hold on all economic and social levers. 
 
 The lessons learned from the model indicate that the explanation for this state hegemony lies in a deliberate weakening of the bargaining power of pressure group leaders through the lever of corruption. It turns out that the impact of such a choice of public policies is still harmful to unemployment, economic growth and poverty. Moreover, the game between the State and the unions in Gabon generates unstable economic balances as long as the structural reforms of the Gabonese economy remain embryonic in an increasingly open world. All of which worsens the state of poverty in this small country, which is nevertheless endowed with potential wealth.

Assessing the Impacts of the New and Proposed Fiscal Regimes on the Resource Rent Capture Ability of the Philippine Mining Industry

Assessing the Impacts of the New and Proposed Fiscal Regimes on the Resource Rent Capture Ability of the Philippine Mining Industry

Assessing the Impacts of the New and Proposed Fiscal Regimes on the Resource Rent Capture Ability of the Philippine Mining Industry

Assessing the Impacts of the New and Proposed Fiscal Regimes on the Resource Rent Capture Ability of the Philippine Mining Industry

Does the politics matter? Legal and political economy analysis of contracting decisions in Ghana’s upstream oil and gas industry

Abstract Ghana is often cited as one of Africa’s most stable democracies. Since 2004, the country has awarded 18 petroleum agreements to various international oil companies (IOCs) and their local partners to explore for hydrocarbons in its offshore basins. In 2010, Ghana became an oil-producing country following earlier commercial discoveries in 2007. Nevertheless, the likelihood of the Ghanaian State getting its fair share of petrodollar revenues primarily depends on its ability to negotiate good petroleum contracts and effectively regulate the industry. This article examines the legal and political economy factors that influence contract outcomes in Ghana’s oil and gas industry. It sheds light on how the inner workings of the political economy, especially in a competitive clientelist setup involving intense electoral competition between two dominant parties in an emerging oil-producing country, influence contractual outcomes—an area less explored in the literature. We find that the country's emerging oil and gas industry has become deeply intertwined with the pervasive, entrenched and clientelist multi-party politics of the day. As such, entrenched rentier social groups—business and political elites—have sometimes sabotaged institutional reform to create conditions that favour rent capture. This is evident, for example, in the award of oil and gas licensing and other supply chain contracts. Ghana’s post-1992 ‘winner takes all’ political mindset and the perceived big financial bonanzas the oil industry offers, resulted in suspicions of impropriety regarding the award of some oil acreages. We argue that if the laws were allowed to work, as they should in practice, Ghana’s oil and gas industry would be better regulated, and better outcomes would arise from the contracting process. Discretionary power should be limited as much as possible and, where granted, subject to a high level of scrutiny.

Intellectual property, technorents and the labour share of production

How does the capture of explicit monopoly rent via intellectual property rights interact with the capture of additional profit via monopsonistic labour markets, and with what consequences? Most analyses of changes in the labour market focus on the distributional struggle between capital and labour over the wage share. This paper examines how the distributional struggle among firms over shares of aggregate profit has affected the labour market, generating rising income inequality. Over the past 40 years, struggles over shares of the value generated in a given commodity chain have driven de jure but not de facto vertical disintegration of those value chains. Firms vertically disintegrated by outsourcing non-core production and support activities, by in-sourcing contingent labour, and, where possible, by adopting a franchise model of corporate organization. The franchise model enables core firms to exert near total control over firms that are technically separate legal entities, while avoiding legal and social responsibility for the workers (and owners) of those subordinate firms. Vertical disintegration has produced three ideal typical kinds of firms whose differing ability to capture value and thus profit stems from their different forms of control over other firms in the value chain. Vertical disintegration generated labour shedding and employment contingency. Differential value capture has concentrated profit into firms with relatively small headcounts, reducing the degree to which profits are (partially) redistributed among workers.

Determinants of Variation in Aquaculture Profits

Substantial increases in profitability, in both fisheries and aquaculture, in the recent years have prompted increased attention to rent creation and rent capture in the seafood sector. In fact, Iceland, The Faroe Island and Norway have all recently implemented taxation of economic rent from salmon aquaculture. Estimation of economic rent is challenging for many reasons, particularly due to its elusive nature and widespread confusion amongst academics as to how to identify and quantify different sources of economic rent. Moreover, accurate rent estimations require that inframarginal profits are not ignored but estimated alongside rent. Ignoring inframarginal profits will overestimate economic rents, which could be problematic since in some industries inframarginal profits can be substantial. We find that salmon aquaculture is one of these. Using data on auction of salmon production capacity from 2018 and 2020, we estimate the market values of salmon farming licenses include a substantial value from inframarginal profits. We find that companies that are less efficient have a larger willingness to pay for marginal production capacity than larger salmon farming companies do, suggesting that inframarginal profits are important in explaining the variation in willingness to pay for new production capacity.

Finance’s New Avatar

The transformation of finance in recent decades has involved new property rights creating novel financial assets and transnational financial relations. Ascendant financialization, associated with financial globalization, has facilitated the capture of financial rents from changes in the prices of securities, held directly or indirectly, and often financed through repo markets. Commercial banks increasingly serve securities and derivative markets, as shadow banking has grown in significance, accelerating financial wealth concentration.

Using preferential trade access to promote global development goals: the case of beef and market access to Norway from Namibia and Botswana

ABSTRACTUsing market access to achieve developmental aims has long been held as a key tenet of global development policy. Using a case study approach based on interviews along and across the beef value chain between Namibia, Botswana, and Norway, this article addresses the question of whether market access to high-value markets for livestock products has developmental benefits. The costs and benefits of using market access for beef products as a developmental policy tool are identified and the key role played by international meat traders in both upgrading and rent capture discussed.

Spatial conservation planning with ecological and economic feedback effects

Most spatial conservation prioritisations being implemented across the globe are based on static approaches to conservation planning. These use snapshots of systems to support decision-making. However, ignoring the dynamic nature of systems can result in misleading spatial prioritisations and missed opportunities to encourage participation in conservation programmes. Using a modelling approach, we show that integrating economic and ecological feedbacks into conservation planning improved social and ecological outcomes. We developed an approach that enabled accounting for feedbacks of farmland set-asides using a popular conservation planning tool. We empirically assessed the impact of ignoring feedbacks on plans to restore the Brazilian Atlantic Forest by comparing outcomes of our approach and a widely used static approach. The proposed approach attained better conservation outcomes than a static approach, at about 7% lower cost, while also allowing more farmers to benefit economically from the set-aside scheme through capitalising on the differences between their opportunity costs and the amount paid by the scheme. Accounting for feedbacks led to substantially different areas being prioritised for farmland set-asides, and to more farmers being included in the set-aside scheme. These results show important benefits from understanding, and then working with, feedbacks that inevitably accompany large-scale conservation interventions. Our approach is the first to integrate both environmental and economic feedbacks into spatial conservation planning, and model information rent capture. In doing so, it demonstrates how existing economic incentives can be used to encourage farmers to join a conservation set-aside, while still resulting in a lower overall intervention cost.

WHO PROFITS FROM PATENTS? RENT-SHARING AT INNOVATIVE FIRMS.

This article analyzes how patent-induced shocks to labor productivity propagate into worker compensation using a new linkage of U.S. patent applications to U.S. business and worker tax records. We infer the causal effects of patent allowances by comparing firms whose patent applications were initially allowed to those whose patent applications were initially rejected. To identify patents that are ex ante valuable, we extrapolate the excess stock return estimates of Kogan et al. (2017) to the full set of accepted and rejected patent applications based on predetermined firm and patent application characteristics. An initial allowance of an ex ante valuable patent generates substantial increases in firm productivity and worker compensation. By contrast, initial allowances of lower ex ante value patents yield no detectable effects on firm outcomes. Patent allowances lead firms to increase employment, but entry wages and workforce composition are insensitive to patent decisions. On average, workers capture roughly 30 cents of every dollar of patent-induced surplus in higher earnings. This share is roughly twice as high among workers present since the year of application. These earnings effects are concentrated among men and workers in the top half of the earnings distribution and are paired with corresponding improvements in worker retention among these groups. We interpret these earnings responses as reflecting the capture of economic rents by senior workers, who are most costly for innovative firms to replace.

Late arrival: The development of resource rent in Icelandic fisheries

The development of resource rent in Icelandic fisheries has been charted since the introduction of the individual transferable quota system in 1990. An estimation of the rent capture of the fishing fee, which is a form of resource rent taxation, is also presented. Two methods were applied to calculate the resource rent. One method is based on the weighted average cost of capital of the Icelandic fishing industry, and the other method involves comparing the return of the capital of fisheries to the general aggregate Icelandic economy. The findings indicate no presence of the resource rent in Icelandic fishing and processing until 2008. Since that time, the rent has been, on average, 16–19% of the export value of the fishing industry, depending on the methods that were applied. The most obvious reason for the long delay before the rent appeared is the almost continual decline of fish catches from 1990–2008. The industry was rationalized during that time, but the rationalization kept up only with the reductions in landings; thus, no resource rent was produced. The rent appeared when the catches started to increase in 2009. In addition, the exchange rate and the weakening of the Icelandic krona were major contributors to the emergence of rent after 2008. The fishing fee captured approximately 13–15% of the calculated rent from 2009. The fee has been relatively modest but was significant in 2016, when it was increased and set at approximately 26–29% of the estimated resource rent of Icelandic fisheries.

Occupational Regulation in the European Union: Coverage and Wage Effects

AbstractWe present the first EU‐wide study on the prevalence and labour market impact of occupational regulation in the European Union. Drawing on a new EU Survey of Regulated Occupations, we find that licensing affects about 22 per cent of workers in the European Union, although there is significant variability across member states and occupations. On average, licensing is associated with a 4 per cent higher hourly wage. Using decomposition techniques we show that rent capture accounts for one‐third of this effect and the remainder is attributed to signalling. We find considerable heterogeneity in the wage gains by occupation and level of educational attainment. Finally, occupational licensing increases wage inequality. After accounting for composition effects, licensing increases the standard deviation of wages by about 0.02 log points.

Evaluating fisheries systems: A comprehensive analytical framework and its application to the EU's Common Fisheries Policy

AbstractDespite regular reforms, problems under the EU's Common Fisheries Policy (CFP) persist. In order to identify priorities for future reforms of the policy, we developed an analytical framework consisting of 17 criteria and specifying indicators, derived from scientific, wider fisheries, and common resources literature. We applied the framework to the CFP governance system, its regulations, institutions, and processes at EU as well as member state level. The results show that the CFP does not fully meet any of the 17 criteria for an effective resource policy. Its performance was assessed as “neutral” regarding 10 criteria and “negative” regarding seven criteria. Trend analysis shows that there is a slightly positive trend regarding the CFP's performance, with five criteria trending positively, 11 showing a neutral trend and only one criterion trending negatively (simplicity of rules). The analysis identified five criteria which are performing badly and have not improved over time: simplicity of rules, user‐pays principle, resource efficiency, accountability, and compliance mechanisms. Future reforms of the CFP should first and foremost address these criteria while continuing efforts to improve the CFP's performance regarding other criteria. The evaluation of the CFP demonstrates the applicability of the analytical framework which can also be applied to other multilevel fisheries governance systems. Moreover, the results can inform reforms of Regional Fisheries Management Organisations. Like the CFP, these institutions manage transboundary fisheries and have not effectively addressed the issues of resource rent capture and resource efficiency.

NEOEXTRATIVISMO LIBERAL-CONSERVADOR: a Política Mineral e a Questão Agrária no Governo Temer

Avaliamos as mudanças ocorridas na política mineral brasileira durante o primeiro ano do governo Temer. Argumentamos que, assim como no período Dilma, este governo teve um posicionamento favorável à expansão mineral. Durante o governo do Partido dos Trabalhadores, associado a um “neoextrativismo progressista”, as ações buscaram aumentar o protagonismo do Estado e a captura da renda mineral destinada, majoritariamente, para políticas de redução da pobreza. Com a mudança de governo, no período “neoextrativismo liberal-conservador”, mantém-se a preocupação com a expansão da mineração, porém o governo deixa que ela ocorra sob as forças de mercado, e a renda mineral capturada pelo Estado é transferida para o setor financeiro. Ao longo do artigo, debatemos as relações entre a mineração e a questão agrária. Defendemos a importância da reflexão crítica sobre este setor extrativo e os impactos na organização do espaço rural brasileiro. Tratamos ainda das estratégias institucionais das mineradoras, avaliamos as iniciativas do governo Temer para abrir novas áreas de mineração e investigamos as mudanças feitas na legislação mineral. Por fim, sublinhamos o que parece ser falsas promessas relativas a tais ações e trazemos também alguns elementos referentes às respostas dos movimentos sociais quanto a essa tentativa de aprofundar o atual modelo mineral do Brasil e os conflitos e disputas territoriais a ele associados.