Ownership risk, investment, and the use of natural resources

The effect of insecure ownership on ordinary investment and natural resourc e use is examined. insecure ownership is postulated to depend on the type o f government regime in power and the prevalence of political violence or in stability. The political determinants of economywide investment are estimat ed from cross-country data, and the results are used to form an index of ow nership security. When introduced into empirical models of natural resource use, this index has a significant and quantitatively important effect on t he use of forests and petroleum. Contrary to conventional wisdom, ownership risk slows resource use in some circumstances. (JEL Q20, Q30, E22).