Existence and Efficiency of Stationary States in a Renewable Resource Based OLG Model with Different Harvest Costs

Karl Farmer and Bednar-Friedl Birgit
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Bednar-Friedl Birgit: University of Graz, Graz, Austria

Studia Universitatis Babeș-Bolyai Oeconomica, 2017, vol. 62, issue 3, 3-32

Abstract: In a renewable resource based overlapping generations (OLG) model without harvest costs, a complex combination of the time discount factor, the resource production share, and the natural regeneration rate ensure the existence of a stationary market equilibrium and its intergenerational efficiency when the own rate of return on natural capital is positive. This paper investigates to what extent previous findings carry over to an OLG economy with two types of unit harvest costs (constant, inverse stock dependent) arising from the competition for labor between resource harvesting and resource processing. In contrast to the model without harvest cost, we show why large unit harvest costs, surprisingly, do not require a complex combination of basic parameters for the existence of a stationary state, and that in the model with stock dependent costs intergenerational efficiency might occur even when the own rate of return on natural capital is negative.

Keywords: Renewable resources; harvest costs; overlapping generations; existence; intergenerational efficiency (search for similar items in EconPapers)
JEL-codes: C62 D90 Q20 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:subboe:v:62:y:2017:i:3:p:3-32:n:1

DOI: 10.1515/subboec-2017-0011

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