American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Depreciating Licenses
American Economic Journal: Economic Policy
(pp. 422–48)
Abstract
Many governments assign use licenses for natural resources, such as radio spectrum, fishing rights, and mineral extraction rights, through auctions or other market-like mechanisms. License design affects resource users' investment incentives as well as the efficiency of asset allocation. No existing license design achieves first-best outcomes on both dimensions. Long-term licenses give owners high investment incentives but impede reallocation to high-valued entrants. Short-term licenses improve allocative efficiency but discourage investment. We propose a simple new mechanism, the depreciating license, and we argue that it navigates this trade-off more effectively than existing license designs.Citation
Weyl, E. Glen, and Anthony Lee Zhang. 2022. "Depreciating Licenses." American Economic Journal: Economic Policy 14 (3): 422–48. DOI: 10.1257/pol.20200426Additional Materials
JEL Classification
- D44 Auctions
- D45 Rationing; Licensing
- H82 Governmental Property
- K11 Property Law
- Q28 Renewable Resources and Conservation: Government Policy
- Q38 Nonrenewable Resources and Conservation: Government Policy
- Q58 Environmental Economics: Government Policy