Privatization and the distribution of income in the commons

The explicit treatment of heterogeneity among the users of the commons leads to results that differ from those that are now generally accepted in the literature. The owner of the fixed factor is not able to expropriate the rents of privatization. Rather, the resulting distribution of income to the free factor after privatization depends on the technology and the institutional arrangements. This result extends to more than two goods if the decline in the price of the good produced in the commons is sufficient to offset the decline in the marginal product of labor in the rest of the economy.