Non-renewable resources in the long run

Rob Hart

Journal of Economic Dynamics and Control, 2016, vol. 71, issue C, 1-20

Abstract: We model a competitive economy in which production is dependent on labor and a non-renewable resource, the stock of which is inhomogeneous. We solve the model analytically and show how—in infinite time—the economy moves away from an initial balanced growth path (b.g.p.) and towards a mature b.g.p. The characteristics of the initial b.g.p. match historical observations of slowly declining resource price and consumption growth tracking global product. The mature b.g.p. depends on the nature of the stock; the more steeply cross-sectional area declines with depth, the faster the rate of price increase. We show how the theoretical model may be adapted and parameterized to explain and predict the evolution of markets for specific resources, applying the model in two cases, copper and petroleum.

Keywords: Non-renewable natural resources; Exhaustible resources; Hotelling rule (search for similar items in EconPapers)
JEL-codes: O30 O40 Q31 Q41 Q43 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:71:y:2016:i:c:p:1-20

DOI: 10.1016/j.jedc.2016.07.006

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