The property rights of forests and trees in Hong Kong : a quantitative illustration of the Coase theorem

Abstract

This dissertation is a quantitative analysis on different significant factors to the improving management of forests and trees in Hong Kong with an aim of justifying the corollary thesis of the Coase Theorem empirically. Within the local academic field, there has been little discussion on the development of forest and tree management practices in Hong Kong. Discussions on the property rights and institutional arrangement of forests and trees as a type of private goods that the market has no incentive to produce are even rarer. Although there has been developed propositions on the pivotal role of the government in influencing the resource allocation pattern of the natural resources, there is yet to be empirical proof on these propositions. In fact, it has been observed that the lush forest cover at the non-built-up area of the city, which comprised of over 75% of the total land area currently and was left in an undeveloped natural state, does not exist naturally. Therefore, this dissertation aims to give an answer to whether the governmental forest and tree management practices has always been significant to this improving natural environment by quantitative research method. It also aims to create a record on the institutional development of the governmental forest and tree management practices, and investigate the unique and irreplaceable role of the government. Three econometric models were developed to carry out the regression analysis based on publicly available statistics regarding forest and tree management from 1886 to 1939, and 1953 to 2018. The regression analysis seeks to find out the most significant factor from the institutional, physical environmental and socio-economic factors in improving the forest and tree management practices, represented by the accumulated quantities of trees managed by the government. The results of the regression analysis support that the governmental forest and tree management practices is a significant factor to the improving management of forests and trees. The irreplaceable roles of the government as land monopoly, lawmaker and law enforcers have contributed significantly to the creation and enforcement of clearly defined exclusive property rights through zoning and enactment and enforcement of ordinances and regulations related to forests and trees. These not only improve the management of forests and trees, but are also fundamental to the introduction of innovation to and investment on the natural resources to open opportunities to induce greater improvements. Nevertheless, the empirical findings suggest that the governmental forest and tree management practices is not the sole significant factor. The occurrence of hill fires is also significant in hindering the improving management of forests and trees. The findings of the research empirically supported the corollary of the Coase Theorem, meaning that the institutional arrangement the governmental forest and tree management practices does result in more forest areas and trees being allocated for improving the natural environment, instead of being logged for other purposes. Under the prohibitively high transaction costs of forests and trees, such improvement could only be made possible by the government.