Resource Depletion and Trade: Adding a Nonrenewable Resource to the Heckscher-Ohlin Model

Henry Thompson

No auwp2013-13, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: This paper develops the intertemporal equilibrium of a small open economy with a nonrenewable resource intensive export and a labor intensive import. Optimal depletion implies the resource price rises at the rate of the capital return. Capital grows with investment and labor at a steady rate, raising the issue of whether depletion necessarily diminishes. Effects of a depletion tax, import tariff, and export subsidy are examined. Simulations with Cobb-Douglas production functions illustrate model properties. The paper also considers a constant depletion rate, tragedy of the commons, and myopic resource owner.

Keywords: Resource Depletion; Trade; General Equilibrium (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-env and nep-int
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