Nonconvexity,efficiency and equilibrium in exhaustible resource depletion

We consider the problem of efficiency and existence of a competitive equilibrium in exhaustible resource markets where extraction costs are nonconvex. Nonconvexity is shown to imply that (1) (efficient) extraction ceases to the left of the minimum efficient scale, i.e., where average costs exceed marginal costs; and (2) a competitive equilibrium does not exist. Introduction of a backstop technology (which induces a flat portion of the industry demand curve) restores both existence and efficiency, provided that the backstop price is sufficiently low. If firms face even a small amount of uncertainty regarding their rivals' stocks, a backstop technology is sufficient to restore existence of competitive equilibrium, even if the backstop price is very high. In this case, however, the competitive equilibrium is not efficient.     

Exhaustibility and Risk as Asset Class Dimensions: A Social Investor Approach to Capital-Resource Economies

This paper develops a framework in which asset class dimensions are extended to include both risk and exhaustibility for explaining the evolution of shadow prices of marginal units of exhaustible natural resources in capital-resource economies. It is shown that the pricing kernel function required for socially valuing marginal units of exhaustible resource, hereafter called the Exhaustion-Stochastic Discount Factor, combines a factor that discounts for risk and another factor that discounts for resource exhaustion over time. The social rate of return on the marginal unit of resource stock adds to the risk-premium an exhaustion premium that accounts for the resource depletion over time. In this setting, the principle of no-arbitrage holds by extending asset-class dimensions to include not only a risk dimension but also an exhaustibility dimension.     

International trade, exhaustible-resource abundance and economic growth

Countries with oil and other natural resources have grown less rapidly than those countries without. This phenomenon is known as the “natural resource curse”. We develop an infinite-horizon, two-country model of trade in which countries are identical, except that one country is endowed with deposits of an exhaustible resource and the other is not. Within the context of the model, we show that this phenomenon can be explained in part by an inelastic demand for the exhaustible resource that increases growth in trade revenues and induces the resource-abundant country to invest relatively less than the country lacking in exhaustible resources. These results are derived analytically and illustrated by an empirical analysis based on plausible parameters obtained from data.     

Adverse selection,commitment and exhaustible resource taxation

This paper studies the contractual relationship between a government and a firm in charge of the extraction of an exhaustible resource. Governments design taxation scheme to capture resource rent and they usually propose contracts with limited duration and possess less information on resources than the extractive firms do. This article investigates how information asymmetry on costs and an inability to commit to long-term contracts affect tax revenue and the extraction path. This study gives several unconventional results. First, when information asymmetry exists, the inability to commit does not necessarily lower tax revenues. Second, under asymmetric information without commitment, an efficient firm may produce during the first period more or less than under symmetric information. Hence, the inability to commit has an ambiguous effect on the exhaustion date. Third, the modified Hotelling's rule is such that an increase in the discount factor does not necessarily reduce the first-period extraction.     

Intertemporal Equity and Hartwick's Rule in an Exhaustible Resource Model*

In a standard exhaustible resource model, it is known that if, along a competitive path, investment in the augmentable capital good equals the rents on the exhaustible resource (known as Hartwick's rule), then the path is equitable in the sense that the consumption level is constant over time. In this paper, we show the converse of this result: if a competitive path is equitable, then it must satisfy Hartwick's rule.     

A model of optimal extraction and site reclamation

Environmental issues during and after extraction are a major problem in contemporary exhaustible resource production. Production operation deteriorates the state of the environment and is a source of possibly harmful emissions. After the extraction has ceased, the site is in need of reclamation and clean-up. This paper analyses the last two stages of exhaustible resource production: extraction and site reclamation decisions. The socially optimal regulation is investigated, and it is found that a pollution tax, a shut-down date and a requirement for the firm to deposit funds for costly reclamation can be used to incentivize socially optimal extraction of the resource. It is also found that the firm can be required to pay the monies to a reclamation trust at the beginning of the extraction operation, which protects the tax payers from the possible insolvency of the firm who tries to avoid paying for the reclamation.     

Competitive,monopolistic and efficient utilization of an exhaustible resource in the presence of habit-formation effects and stock dependent costs

The letter investigates the utilization of an exhaustible resource under perfect competition and monopoly, and compares monopolistic and competitive depletion patterns with those under social surplus maximization. Demand and costs are assumed to depend on current as well as accumulated output.     

ACCOUNTING FOR EXHAUSTIBLE RESOURCES IN THE CANADIAN SYSTEM OF NATIONAL ACCOUNTS: FLOWS, STOCKS AND PRODUCTIVITY MEASURES

The paper shows that the Canadian System of National Accounts includes exhaustible resources but treats them as if they were produced goods. Thus, the claim that conventional accounts ignore the contribution of exhaustible natural resources is partly true. To fully account for exhaustible resources, we present an alternative national accounting framework that incorporates natural resource flows and stocks. The framework modifies the measure of the net domestic product by a factor that differs from the Hartwick-Solow-Weitzman rule and leads to different estimates of GDP, national wealth, and productivity growth. An application to the Canadian oil and gas industry shows order-of-magnitude effects.     

可耗竭资源型企业转移区位选择行为研究进展及启示

可耗竭资源型企业转移区位选择行为既是一个新兴的现实问题,又是一个理论前沿问题。本文基于系统工程思想,运用综合分析与逻辑归纳相结合的方法,从企业转移行为与区位选择行为相互耦合的两部分入手,系统地梳理了可耗竭资源型企业转移区位选择行为的研究视角、基本脉络、主要内容和基本结论。通过比较、分析已有研究的四个方面的特点、局限和破缺,提出了未来进一步研究的方向。     

Duopoly models with a joint capacity constraint

The paper proposes a two-stage mixed duopoly model of exhaustible resource market where at the first stage the government decides on the degree of privatization of public firm and at the second stage the public and private firms decide simultaneously on the two-period extraction paths. It is demonstrated that if the two firms have symmetric technologies with increasing marginal extraction costs and the same resource stocks, then neither full nationalization of any of the two firms nor full privatization will be socially desirable. It is shown that the presence of a semi-public firm improves intertemporal allocation of the fixed resource stock. Thus, partial privatization is optimal even under exogenously fixed total outputs of each firm. For asymmetric cost case, when the public firm is less efficient than the private firm, we derive the conditions under which full nationalization or full privatization is optimal.     

Exhaustible resources,technology choice and industrialization of developing countries

How should the world economy adapt to the increased demand for exhaustible resources from countries like China and India? To address that issue, this paper presents a dynamic model of the world economy with two technologies for production; a resource technology, which uses an exhaustible resource as an input and an alternative technology, which does not. I find that both the time path of resource extraction and the adoption of the alternative technology depend on the optimal allocation of capital across the technologies, and on the size of the capital stock in relation to the resource stock. In particular, if the capital stock is low, only the resource technology is used initially and the alternative technology is adopted with a delay. Next, I use the model to analyze the effects of industrialization of developing countries on the extraction of oil and technology choice for energy production. As a result of industrialization, the alternative technology for energy production is adopted earlier.     

Optimal combination of pollution prevention and abatement policies: The case of agricultural drainage

The adoption of pollution prevention and abatement practices is examined in the context of a model of exhaustible resource use with a backstop technology. For the sake of concreteness, the paper focuses on the problem of water-logging caused by the subsurface accumulation of agricultural drainwater. In modelling this problem, a region's underground capacity to store drainwater is considered an exhaustible resource, while the installation of subsurface drainage is viewed as the corresponding backstop technology (or abatement practice). The exhaustible resource is typically over-exploited due to common access problems, which forces a suboptimally fast adoption of the abatement practice. Conservationist irrigation technologies, such as drip and sprinkler systems, tend to reduce drainwater generation, and their adoption could increase social welfare by delaying the abatement stage. Public policies are suggested to increase the adoption of such conservationist technologies. Data from California is used to illustrate the results and to demonstrate the efficacy of the model for policy purposes. While the setting used for the analysis in this paper is quite specific (i.e., water-logging), the same general modelling ideas may be applied to many other problems of environmental degradation.     

Sustainability economics: Where do we stand?

Environmental economics, which is a branch of resource economics – the environment as a scarce resource – is essentially about market failures, the costs of pollution and pollution abatement, and the economics of regulation. Sustainability economics includes the problem of maintaining economic growth, while reducing pollution and/or its impacts, with special attention to the linked problems of energy supply (not to mention the supply other exhaustible resources), climate change and – most urgently – fossil fuel consumption. There is a need for integration of resource and environmental economics under a new rubric, sustainability economics.     

Natural resource economics under the rule of Hotelling

Abstract.  Natural resource stocks held in situ are physical assets. Equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere. I discuss a number of factors relating to the evolution of extraction costs, to the durability of the resource, to market structure, and to uncertainty, that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks. The emphasis is put on how those factors can potentially help bridge the gap between the basic Hotelling's rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources. I also highlight some theoretical and empirical issues that need further attention.     

汇率变动、可耗竭资源和经济增长

本文基于贸易的视角,从理论和实证两方面分析了汇率变动、可耗竭资源与经济发展之间的关系.得出贸易传导机制下的"资源诅咒"在我国虽然存在不明显,这种局面到底能持续多久,在一定程度上依赖于我国资源的承受力和可持续性的结论.最后给出了从长远来看,人民币适度升值,可以化解"资源诅咒"的陷阱的建议.     

Sustainable Development,Renewable Resources and Technological Progress

Conflicts between optimality and sustainability are typical in the literature on sustainable development. Using the capital-resource growth model, Pezzey and Withagen (1998, Scandinavian Journal of Economics 100 (2), 513–527) have proved that if natural resources are exhaustible, the time-path of consumption is single-peaked, declining from some point in time onwards. This paper extends the model to include technical progress, resource renewability, extraction costs and population growth. The main result is that, for any constant returns to scale technology, optimal paths can be sustainable only if the social discount rate does not exceed the sum of the rates of resource regeneration and augmentation. The development of resource-saving techniques is crucial for sustaining consumption per capita in the long run, whereas capital depreciation and extraction costs are neutral with respect to this sustainability condition.     

Exhaustible Resources, Monopolistic Competition, and Endogenous Growth

One of the central analytical findings of the growth literature is that continuous growth is possible even in an economy with exhaustible resources. Based on this result, this paper addresses the question of whether different equilibrium trajectories which lead to a balanced growth path are possible within an endogenous growth model with incomplete competition. Although the Solow-Stiglitz condition is violated due to a monopolistic sector, we nevertheless demonstrate that steady growth in per capita consumption is possible under the condition that the rate of entry of new monopolists exceeds that of the average monopolist's decline in output. As a necessary but not sufficient condition for indeterminacies in a growing economy, this paper demonstrates that the partial production elasticity of capital must be smaller than that of the exhaustible resource.     

On the Peaking of Consumption with Exhaustible Resources and Zero Net Investment

We investigate an intertemporal model with an exhaustible resource inflowwhich exhibits a single peak in consumption on the path of development. Thepeak follows the date at which net investment is zero. The ``top' ofconsumption is higher and flatter and peaks later when the discount rate islower. ``Low' endowments of the exhaustible resource stock (and ``high'discount rates) are associated with strictly declining consumption paths.     

Cross-border mergers and strategic alliances

This paper develops a model with distribution costs to study firm cooperation in forming strategic alliances and mergers, under different types of foreign market entry modes, that is, export or foreign direct investment (FDI). Under both export and FDI, we find that cross-border alliances (mergers) dominate domestic alliances (mergers); and cross-border alliances and mergers are preferred to independence if and only if distribution cost is high. Under export, cross-border alliances are chosen in equilibrium if distribution cost is high. Under FDI and with high distribution cost, cross-border alliances (mergers) are chosen in equilibrium if plant setup cost is low (high).     

Costing anaesthetic practice: reconciling perspectives and approaches

Summary

In a previously published article by Broadway and Jones, the anaesthesia-related cost of a hernia repair operation was estimated to be £74.40, of which 21% was accounted for by anaesthetic agents and adjunct drugs. This result contrasts with our estimate of the total procedure cost for an inpatient hernia repair operation of £1,037.39, of which anaesthetic agents and adjunct drugs comprised less than 1%. In order to explain this difference, in this paper we compare and contrast our methodology for and perspective on costing resource use in anaesthesia with those used by Broadway et al. We conclude that these two apparently divergent results, once reconciled in terms of cost coverage and perspectives taken, are broadly equivalent (a reconciled cost of £78.21 compared with the £74.40 of Broadway and Jones.), and that the cost of anaesthetic agents and adjunct drugs constitute a small proportion of total procedure costs.