Freni, Giuseppe (2009): Factor intensity and order of resource extraction.
Download (5MB) | Preview
This paper characterizes the optimal time paths of extraction of several nonrenewable resource deposits with different costs of extraction when the extracted resource can be converted into productive capital and the extraction process, as well as the production of the substitute, requires two primary factors of production. Under a technological assumption granting that the time paths of primary factor prices are monotonic, we show that, for each pair (lower cost/higher cost) of deposits, an intensity condition is necessary in order to have discontinuous extraction of the lower cost deposit. We also show that the same condition is sufficient for discontinuous extraction of the lower cost deposit, provided the stock of the lower cost deposit is sufficiently large and the stocks of all other deposits are sufficiently small.
|Item Type:||MPRA Paper|
|Original Title:||Factor intensity and order of resource extraction|
|Keywords:||Exhaustible resources; Optimal control; Order of extraction|
|Subjects:||Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
|Depositing User:||Giuseppe Freni|
|Date Deposited:||22. Nov 2009 03:44|
|Last Modified:||19. Feb 2013 04:35|
Amigues, J.P., Favard, P., Gaudet, G., Moreaux, M. (1998), “On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited”, Journal of Economic Theory 80, 153-170.
Chakravorty, U., Moreaux, M., Tidball, M. (2008), “Ordering the Extraction of Polluting Nonrenewable Resources”, American Economic Review, 98 (3), 1128-44.
Favard, P. (2002), “Does productive capital affect the order of resource exploitation?”, Journal of Economic Dynamics and Control, 26 (6), 911–918.
Freni, G. (2004), “'Partial Equilibrium Analysis' and Order of Resource Extraction”, under revision.
Freni, G., Gozzi, F., Salvadori, N. (2006) “Existence of Optimal Strategies in Linear Multisector Models”, Economic Theory, 29(1), 25-48.
Freni, G., Gozzi, F., Pignotti, C. (2008), “Optimal strategies in linear multisector models: Value function and optimality conditions”, Journal of Mathematical Economics, 44 (1) , 55-86.
Gaudet, G., Moreaux, M., Salant, S. (2001), “Intertemporal Depletion of Resource Sites by Spatially Distributed Users,” American Economic Review, 91, 1149-59.
Herfindahl, O.C. (1967) “Depletion and Economic Theory”, in Gaffney, M. (Ed.), Extractive Resources and Taxation, Univ. of Wisconsin Press, Madison, pp. 63-90.
Holland, S. P. (2003), “Extraction Capacity and the Optimal Order Of Extraction”, Journal of Environmental Economics and Management, 45(3), pp. 569-588.
Kemp, M., Long N. V. (1980), “On Two Folk Theorems Concerning the Extraction of Exhaustible Resources”, Econometrica, 48, 663-673.
Im, E. I., Chakravorty, U., Roumasset, J. (2006), "Discontinuous extraction of a nonrenewable resource”, Economic Letters, 90(1), 6-11.
Jones, L. E., Manuelli R. (1990), “A Convex Model of Equilibrium Growth: Theory and Policy Implications”, Journal of Political Economy, 98, 1008-38.
Lewis, T.R. (1982), “Sufficient Conditions for Extracting Least Cost Resource First”, Econometria, 50, 1081-1083.
von Neumann, J. (1945), “A Model of General Economic Equilibrium”, Review of Economic Studies, 13, 1-9.
Rebelo, S. (1991), “Long-run Policy Analysis and Long-run Growth”, Journal of Political Economy, 99, pp. 500-21.
Solow, R.M., Wan, F.Y. (1976), “Extraction Costs in the Theory of Exhaustible Resources”, Bell Journal of Economics 7, 359-370.