Risk aversion in renewable resource harvesting

Claudia Kelsall, Martin Quaas and Nicolas Querou

Journal of Environmental Economics and Management, 2023, vol. 121, issue C

Abstract: We study optimal harvesting of a renewable resource with stochastic dynamics. To focus on the effect of risk aversion, we consider a resource user who is indifferent with respect to intertemporal variability. In this setting, a constant escapement strategy is optimal, i.e. the stock after optimal harvesting is constant. We find that under common specifications of risk aversion, increasing risk and risk aversion increase current resource use. We show that this is due to an investment effect, i.e. the resource user invests in risk free alternatives, rather than the risky resource stock. A quantitative application of the model for the Eastern Baltic cod fishery shows that risk and risk aversion can have a much larger effect on optimal harvesting than found in the previous literature.

Keywords: Resource economics; Investment under uncertainty; Risk aversion; Prudence; Precautionary savings (search for similar items in EconPapers)
JEL-codes: D81 Q2 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0095069623000736
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Risk aversion in renewable resource harvesting (2023)
Working Paper: Risk aversion in renewable resource harvesting (2022)
Working Paper: Risk aversion in renewable resource harvesting (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:121:y:2023:i:c:s0095069623000736

DOI: 10.1016/j.jeem.2023.102855

Access Statistics for this article

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

More articles in Journal of Environmental Economics and Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().