Trade and Resource Sustainability with Asset Markets

Larry Karp and Armon Rezai

Dynamic Games and Applications, 2022, vol. 12, issue 3, No 8, 929-953

Abstract: Abstract Trade changes incentives to protect an open-access natural resource independently of its effect on the resource price. General equilibrium linkages cause resource policy to affect the price of privately owned assets regardless of whether they are used in the resource sector. In the closed economy, the asset market in our overlapping generations setting creates incentives for currently living agents to protect the natural resource. The interplay of the asset market and general equilibrium effects causes trade to reverse these incentives. Trade liberalization and the establishment of formal property rights are policy complements: the former makes the latter more important.

Keywords: Endogenous property rights; Trade; Asset pricing; Open-access resource; Policy complements; Overlapping generations; Sequential game; Markov perfection; F1; E24; H23; Q28; Q56 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s13235-021-00400-4

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