Sustainability in Resource Economies: Revisited

Seiichi Katayama
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Seiichi Katayama: Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan

No 100, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Sustainability of the average level of consumption in resource economies is examined under price uncertainty. The resource type is either purely exhaustible or renewable. Planners in the resource economies have precise knowledge of the present market price of the extracted resource. But its future course is by no means certain for them. It is well known that the planners can expect the national consumption level kept constant if the competitive resource rent at each moment of time is invested to non-resource capital, provided that the resource price is constant throughout the planning period. Here we need to modify the rule to incorporate capital gains or losses arising from the price changes. The paper shows that the uncertainty affects the average level of consumption only when the cost of extraction is nonlinear in the extraction level.

Keywords: Natural resources; Uncertanty; Prices (search for similar items in EconPapers)
JEL-codes: F21 Q38 (search for similar items in EconPapers)
Pages: 17 pages
Date: 1999-11
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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:100

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