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Open Access Renewable Resources, Urban Unemployment, and the Resolution of Dual Institutional Failures

Ichiroh Daitoh () and Nori Tarui ()
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Ichiroh Daitoh: Faculty of Business and Commerce, Keio University
Nori Tarui: Department of Economics, University of Hawaii at Manoa and the University of Hawaii Economic Research Organization (UHERO)

No 201906, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: This paper investigates how poverty reduction and environmental resource preservation can be simultaneously achieved in a small open dual economy with urban wage rigidity, rural open access resources, and rural-urban migration. An increase in the export tax rate on the rural resource good increases urban unemployment in both the short and long run with resource dynamics. We find that the first-best policy, which makes the two goals compatible, is an urban wage subsidy combined with either a rural wage subsidy at a lower rate or, if the urban output price is sufficiently high, a rural tax. An increase in the export tax on the resource good could induce rural institutional change away from open access, but protection of urban manufacturing through a tariff hinders such rural institutional change.

Keywords: Open access; renewable resource; urban unemployment; rural-urban migration; export tax on the resource good; institutional change (search for similar items in EconPapers)
JEL-codes: O13 Q27 F18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-env
Date: 2019-03
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