Lobbying, Trade and Renewable Resource Harvesting

Lobbying, Trade and Renewable Resource Harvesting Richard Damania and E. Barbier The over-exploitation of renewable resources has intensified international concerns over the management of these resources. This has prompted calls for the use of international policy interventions such as trade sanctions and contingent transfers, to encourage sustainable resource management practices in these countries. A growing body of literature suggests that resource harvesting in these countries is largely determined by the rent seeking activities of special interest groups This paper develops a model to assess the interaction between lobbying, trade and the incentives to extract a renewable resource. It is demonstrated that in a lobbying equilibrium trade sanctions may be counterproductive and lead to greater harvesting of the renewable resource. The paper further considers whether aid in the form of international transfers can be used to encourage more sustainable harvesting practices. We find that when resource stocks are sufficiently low, transfers may also fail to reduce over-exploitation of the resource. However, it is possible to design a transfer scheme that overcomes this problem. Thus, an appropriately designed system of transfers is likely to be more effective in promoting sustainable harvesting practices. JEL Codes: Q23, Q28, D78, F19.