Does Price of an Essential Non-Renewable Resource Necessarily Grow?

Ibrahim Yetkiner ()

A chapter in Proceedings of the International Conference on Globalization and Its Discontents, 2007, pp 131-147 from Izmir University of Economics

Abstract: Dasgupta and Heal’s 1974 paper extends Hotelling’s 1931 partial equilibrium model into a dynamic general equilibrium model. Both papers show that nonrenewable resource prices do grow exponentially, which is called the Hotelling’s rule in the literature. Empirical evidence on the contrary shows that most nonrenewable prices are constant in the long-run. The controversy between theory and empirical regulatory perhaps may be called the Hotelling’s Paradox. This paper, based on Dasgupta and Heal (1974), shows that nonrenewable dependent growth does not always generate skyrocketing resource prices. In particular, this paper shows that resource price converges to a constant under Cobb-Douglas technology and that the model economy dies out under a particular value of elasticity of marginal utility.

Keywords: Non-Renewable Resources; Hotelling; resource prices (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:izm:prcdng:200709

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