GLOBAL DYNAMICS IN A GROWTH MODEL WITH AN EXHAUSTIBLE RESOURCE
Hassan Benchekroun () and
Departmental Working Papers from McGill University, Department of Economics
We revisit the seminal growth model with exhaustible resources, the so called Dasgupta-Heal-Stiglitz-Solow model (DHSS). For this optimal control problem with two state variables, we explicitly characterize the dynamics of all the variables in the model and from all possible initial values of the stocks. We determine the condition under which consumption is initially increasing with time and the condition under which initial investment is positive implying that overshooting of man-made capital occurs. We show that the initial consumption under a utilitarian criterion starts below the maximin rate of consumption if and only if the resource is abunduant enough and that under a utilitarian criterion, it is not necessarily the present generation that benefits most from a windfall of resources.
JEL-codes: E20 Q30 C61 C65 (search for similar items in EconPapers)
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Journal Article: The optimal depletion of exhaustible resources: A complete characterization (2011)
Working Paper: Global Dynamics in a Growth Model with an Exhaustible Resource (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mcl:mclwop:2008-01
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