International Trade and Open-Access Renewable Resources: The Small Open Economy Case

James Brander and M. Scott Taylor

Canadian Journal of Economics, 1997, vol. 30, issue 3, 526-52

Abstract: The authors examine a small open economy with an open-access renewable resource. Using a two-sector general equilibrium model, they characterize the autarkic steady state and then show that trade reduces steady-state utility for a diversified resource exporter. Instantaneous gains occur as trade opens but they are eroded by ongoing resource depletion. The present value of utility falls for appropriate discount rates and terms-of-trade 'improvements' may be welfare reducing. The authors also show that autarky prices, the pattern of trade, and the structure of production all are linked to a simple ratio of the intrinsic resource growth rate to labor supply.

Date: 1997
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Working Paper: International Trade and Open Access Renewable Resources: The Small Open Economy Case (1995)
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