Managing a renewable resource facing the risk of a regime shift in the ecological system

Aart de Zeeuw and Xiaoli He

Resource and Energy Economics, 2017, vol. 48, issue C, 42-54

Abstract: Resource management has to take account of the possibility of regime shifts in the ecological system that provides the resource. Regime shifts are uncertain and lead to structural changes in the system dynamics, lowering the carrying capacity of the resource. Optimal management is driven by two considerations. First, it becomes precautionary if a higher stock of the renewable resource decreases the hazard of a regime shift. Second, it either becomes precautionary or more aggressive depending on the adjustments that are needed after the regime shift. This in turn depends on the elasticity of intertemporal substitution. In conclusion, facing the risk of a regime shift in the ecological system, optimal management is ambiguous but precautionary if the marginal hazard rate of the regime shift is sufficiently high.

Keywords: Q22; C61; D81; Regime shifts; Tipping points; Uncertainty; Renewable resources; Precaution (search for similar items in EconPapers)
Date: 2017
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/S0928765516300252
Full text for ScienceDirect subscribers only

Related works:
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:resene:v:48:y:2017:i:c:p:42-54

DOI: 10.1016/j.reseneeco.2017.01.003

Access Statistics for this article

Resource and Energy Economics is currently edited by J. F. Shogren and S. Smulders

More articles in Resource and Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().