Does Might Make Right? An Experiment on Assigning Property Rights

This paper investigates the role of property rights in environmental decisions and choices regarding the distribution of income in a downstream water pollution problem. The results confirm that who owns the property rights is a significant determinant of these decisions. More specifically, under certain conditions a property rights owner who suffers the consequences of negative externalities acts, on average, more environmentally friendly than a property rights owner who causes such negative externality. Similarly, when it comes to the distribution of income, the property rights owners who cause negative externalities allocate on average a larger share of the income to themselves.