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Externality and common-pool resources: The case of artesian aquifers

Hubert Stahn and Agnes Tomini

Journal of Environmental Economics and Management, 2021, vol. 109, issue C

Abstract: This study examines a specific class of common-pool resources whereby rivalry is not characterized by competition for the resource stock. Artesian aquifers are a typical example of such resources since the stock never depletes, even when part of the resource is extracted. We first propose a dynamic model to account for the relevant features of such aquifers such as the water pressure and well yield and characterize the corresponding dynamics. We then compare the social optimum with the private exploitation of an open-access aquifer. The comparison of these two equilibria highlights the existence of a new source of inefficiency. In the long run, this so-called pressure externality results in an additional number of wells for the same water consumption, thereby raising costs. Finally, we characterize a specific stock-dependent tax to neutralize the pressure externality.

Keywords: Common-pool resource; Externality; Optimal management; Public regulation; Dynamic optimization (search for similar items in EconPapers)
JEL-codes: C61 H21 H23 Q15 Q25 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:109:y:2021:i:c:s0095069621000681

DOI: 10.1016/j.jeem.2021.102493

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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