THE OPTIMAL DEPLETION OF EXHAUSTIBLE RESOURCES: A COMPLETE CHARACTERIZATION

Hassan Benchekroun and Cees Withagen

Departmental Working Papers from McGill University, Department of Economics

Abstract: We provide the closed form solution to the Dasgupta-Heal-Solow-Stiglitz (DHSS) model. The DHSS model is based on the seminal articles Dasgupta and Heal (Rev. Econ. Stud., 1974), Solow (Rev. Econ. Stud., 1974) and Stiglitz (Rev. Econ. Stud., 1974) and describes an economy with two assets, man-made capital and a nonrenewable resource stock. We explicitly characterize, for such an economy, the dynamics along the optimal trajectory of all the variables in the model and from all possible initial values of the stocks. We use the analytical solution to prove several properties of the optimal consumption path. In particular, we show that the initial consumption under a utilitarian criterion starts below the maximin rate of consumption if and only the resource is abundant enough and that under a utilitarian criterion, it is not necessarily the present generation that benefits most from a windfall of resources.

JEL-codes: C65 E20 Q30 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-01
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The optimal depletion of exhaustible resources: A complete characterization (2011)
Working Paper: The Optimal Depletion of Exhaustible Resources: A Complete Characterization (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:mcl:mclwop:2010-01

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