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Specialization and Nonrenewable Resources: Ricardo Meets Ricardo

Ujjayant Chakravorty (), Darrell Krulce and James Roumasset ()
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Darrell Krulce: QUALLCOM, Inc., San Diego

No 200401, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects.

Keywords: Dynamic comparative advantage; energy; non-renewable resources; multiple demands; Hotelling (search for similar items in EconPapers)
JEL-codes: D9 Q3 Q4 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2004
New Economics Papers: this item is included in nep-ene, nep-mic and nep-res
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Forthcoming in the Journal of Economic Control and Dynamics

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http://www.economics.hawaii.edu/research/workingpapers/WP_04-1.pdf First version, 2004 (application/pdf)

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