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Managing a common-pool resource with no stock externality: The case of artesian aquifers

Hubert Stahn and Agnes Tomini

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Abstract: This paper studies a specific class of common-pool resources whereby rivalry is not characterized by competition for the resource stock. Artesian aquifers have been identified as a typical example, since the stock is never depleted, even when part of the resource is extracted. We first propose a dynamic model to account for relevant features of such aquifers-like water pressure, or well yield-and to characterize the corresponding dynamics. We then compare the social optimum and the private exploitation of an open-access aquifer. The comparison of these two equilibria allows us to highlight the existence of a new source of inefficiency. We refer to this as pressure externality. This externality results in the long run in an additional number of wells for the same water consumption, and hence additional costs. Finally, we characterize a specific stock-depend tax to neutralize the pressure externality. JEL Classification: H21, H23, Q15, Q25, C61

Keywords: common-pool resource; externality; optimal management; public regulation; dynamic optimization (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-env
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