Private property and economic efficiency: A study of a common-pool resource

The British Columbia halibut fishery provides a natural experiment of the e ffects of "privatizing the commons." Using firm-level data from the fishery 2 years before private harvesting rights were introduced, the year they we re implemented, and 3 years afterward, a stochastic frontier is estimated t o test for changes in technical, allocative, and economic efficiency. The s tudy indicates that (1) the short-run efficiency gains from privatization m ay take several years to materialize and can be compromised by restrictions on transferability, duration, and divisibility of the property right; (2) substantial long-run gains in efficiency can be jeopardized by preexisting regulations and the bundling of the property right to the capital stock; an d (3) the gains from privatization are not just in terms of cost efficiency but include important benefits in revenue and product form.