Renewable resources,property-rights regimes and endogenous growth

We extend Brander and Taylor's [Brander, J.A., Taylor, M.S., 1998. The simple economics of Easter Island: a Ricardo-Malthus model of renewable resource use. Am. Econ. Rev. 88, 119–138.] model of feast and famine cycles on Easter Island using Galor and Weil's [Gailor, O., Weil, D.N., 2000. Population, technology and growth: from Malthusian stagnation to the demographic transition and beyond, Am. Econ. Rev. 90, 806–28] model of endogenous technological advance, where technological change is related to the population. We note that different property-rights regimes will influence the relative direction of technological advance—whether that advance is in harvesting technologies or in technologies that influence the growth rate of some renewable biological resource. Property-rights regimes that favor biological growth rates over harvest rates tend to dampen feast–famine cycles, while those that favor harvest efficiency worsen such cycles.     

International trade and terrestrial open-access renewable resources in a small open economy

Abstract .  In this paper, I investigate the effects of trade liberalization and policies on deforestation by extending a small open economy model with open-access renewable resources developed by Brander and Taylor (1997a) . I endogenize the carrying capacity of the resource. I find, unlike Brander and Taylor, that trade liberalization may increase the forest stock in the resource-abundant country and may decrease the forest stock in the resource-scarce country. Moreover, the policies primarily aimed at protecting forests, such as import restrictions by importing countries and forest certification for well-managed forests, may have perverse effects on the forest stock.     

Open-access renewable resources and pollution: Trade and policy implications in a two-country model

We examine the interaction between the relative inter-industry pollution externality and resource stock externality of harvesting in deciding trade patterns and welfare gains from trade in a two-country model (less-developed countries) with renewable resources in the absence of resource management. This paper focuses on the impacts of trade policies on resource conservation and welfare outcomes in two countries with different environmental management regimes. Differences in pollution management standards between both countries determine the direction of trade flow and gains from trade in a diversified production case. The country with a lower pollution intensity parameter, an exporter of resource goods, certainly experiences welfare loss in the post-trade steady-state and may also suffer a decline in utility throughout the transition path. However, a country with higher pollution intensity and importers of resource goods tend to gain from trade. Under national open-access resources, given that pollution is regulated up to a certain point in both countries, this study finds that implementing better restrictions on only one externality factor is not optimal from a post-trade welfare perspective. Lastly, from the point of view of policy suggestion, this paper offers an optimal trade policy that the economic and environmental effects of enforcing import tax on resource goods are likely to be Pareto-improving consequences compared to the implications of using an export tax.     

Marshall's Scissors: The Gains and Losses from Trade

In a Ricardian two‐factor endowment model with Cobb–Douglas tastes and many goods, this paper describesthe interaction of the demand and supply sides to determine the gains and losses from trade. If the abundant factor has a sufficiently rich profile of comparative advantages, trade causesthe proportionate gain to the abundant factor to be smaller than the proportionate loss to the scarce factor. However, if the abundant factor has sufficiently skewed comparative advantages toward the best goods, then the opposite will hold. Some examples suggest that these patterns may have something to do with the selection of trade regimes. In the usual one‐factor Ricardian model the gains from trade to a country are enhanced by higher demand shares for imports, but such gains from trade from imports to a country is not the case in a factor endowment model.     

Transboundary Marine Resources and Trading Neighbours

The importance of space in analyzing issues pertaining to renewable resources can hardly be overstated. Many such resources are mobile and spatially heterogeneous with respect to bio-economic variables, with important implications for both domestic management regimes and for international externalities and policy interactions. This paper uses a simple general-equilibrium framework to show that acknowledging the inter-jurisdictional mobility of a resource such as fish has the potential to alter or qualify some of the conservation and welfare results obtained in the canonical models. The previous literature on trade and renewable resources has focused on cases where national resource stocks are independent. Brander and Taylor (Can J Econ 30(3):526?C552, 1997a; Resour Energy Econ 19(4):267?C297, 1997b; J Int Econ, 1998a; Am Econ Rev, 1998b) find that trade leads to resource stock depletion for an open-access resource-exporting country, while the non-resource exporter is necessarily diversified. In contrast, we find that the country with a comparative advantage in the resource good may gain from a conservation standpoint, while its partner can specialize in the manufactured good and may incur conservation and even welfare losses from trade.     

The pattern of specialization and economic growth: The resource curse hypothesis revisited

This paper explores the relation between countries’ pattern of trade specialization and long-term economic growth. It shows that countries specializing in the export of natural resource based products only fail to grow if they do not succeed in diversifying their economies and export structure. This conclusion follows from an empirical investigation that has three innovative features. First, it uses a dynamic panel data analysis. Secondly, it employs disaggregated trade data sets to elaborate different measures of trade specialization that distinguish between unprocessed and manufactured natural resource products and are informative about the countries’ trade diversification experience, their link to world demand trends and involvement in intra-industry trade. The final innovative aspect of the paper relates to our empirical findings: it is only specialization in unprocessed natural resource products that slows down economic growth, as it impedes the emergence of more dynamic patterns of trade specialization.     

Shared renewable resources and gains from trade under technology standards

Using a two‐country, two‐good model of international trade, we examine gains from trade and strategic interaction in resource management among countries that share renewable resources such as fishery stocks. Two goods are a resource good, which is the harvest of the shared stock, and some other good that may be thought of as manufactures. The productivity of the resource good depends on harvesting technology and the stock level. This paper focuses on technology standards (e.g., restrictions on fishing gears, vessels, areas, and time) over other methods for resource management because they are most commonly implemented in fisheries. Technology standards are modeled as a restriction on the harvesting technology; that is, under strict technology standards, firms exploit resources as if they are using inferior harvesting technology. We show that an opening up of trade may reduce the shared stock and cause steady‐state utility to decrease in a resource‐good importing country and increase in a resource‐good exporting country. Strikingly, when the shared stock is in jeopardy (a high demand for the harvest), steady‐state harvest is maximized after an opening up of trade by what we call multilateral resource management in this paper and both countries gain from trade.     

Could institutional reform have saved Easter Island?

This paper extends the Brander and Taylor general-equilibrium model of population and resource management dynamics to a variety of institutional settings. The authors simulate the economic history of Easter Island, modifying the model to examine the impact of market institutions and different property-rights structures. The major finding of the paper is that modification of the economic institutions on Easter Island could have damped the feast-and-famine cycles that plagued its later history.     

HISTORY‐DEPENDENT PATHS AND TRADE GAINS IN A SMALL OPEN ECONOMY WITH A PUBLIC INTERMEDIATE GOOD*

This study reexamines McMillan's (International Economic Review 19 (1978), 665–78) analysis of a dynamic small open economy with a public intermediate good. Concerning the trade patterns of the open economy, we find results that were overlooked in McMillan's analysis. Among others, if labor endowment is of intermediate size, there are two saddle‐point steady states, and the initial stock of the public good determines the long‐run trade pattern. We also add a gains‐from‐trade analysis to McMillan's model and demonstrate that if the economy has a comparative advantage in a good with productivity less sensitive to the public intermediate good, the economy may lose from trade at the steady state.     

International trade and the division of labor

This paper develops a model of international trade based on the division of labor under perfect competition. International trade, by eliminating the duplication of coordination costs, leads to a greater variety of tasks, each produced at a larger scale than in autarky. The greater variety of tasks implies greater division of labor and hence gains from trade. Extending the model to two factors of production yields the additional result that if the two countries are sufficiently similar in their relative endowments, then both factors of production can experience gains from trade.     

Universal Dumping of Homogeneous Products

Contrary to predictions from traditional comparative advantage analysis, a class of models with imperfect competition predicts intra-industry trade in homogeneous goods. Brander and Krugman offer a model with two countries and one firm in each country which generates the outcome that both firms dump into the export market (reciprocal dumping). The present paper determines the extent to which higher dimensionality alters this outcome by introducing a model with several firms in each of several countries. It is shown that dumping is universal. Thus, whenever trade occurs dumping occurs.     

Are virtual water “flows” in Spanish grain trade consistent with relative water scarcity?

Virtual water adds a new dimension to international trade, and brings along a new perspective about water scarcity and water resource management. Most virtual water literature has focused on quantifying virtual water “flows” and on its application to ensure water and food security. Nevertheless, the analysis of the potential gains from international trade, at least from a water resources perspective, needs to take into account both spatial and temporal variations of blue (groundwater and stream flow) and green (soil moisture) water, as well as the socioeconomic and policy conditions. This paper evaluates whether Spanish international trade with grains is consistent with relative water scarcity. For this purpose, the study estimates the volume and economic value of virtual water “flow” through international grain trade for the period 1997-2005, which includes 3 years with different rainfall levels. The calculations show that Spain is a net virtual water “importer” through international grain trade. The volume of net virtual water “imports” amounts to 3420, 4383 and 8415 million m³ in wet (1997), medium (1999) and dry (2005) years, respectively. Valuing blue water at its shadow price or scarcity value, blue water “exports” oscillate between 0.7 and 34.2 million Euros for a wet and dry year, respectively. Overall, grain trade is apparently consistent with relative water scarcity as net imports increase in dry years. However, the evolution of grain exports, expressed as a variation in quantity and volume, does not match the variations in resource scarcity. A disaggregated crop analysis reveals that there are other factors, such as quality, product specialization or the demand for a standardized product, which also influence trade decisions and are not included in the notion of virtual water. These facts, among others, can therefore create potential distortions in the application of virtual water to the analysis of specific trade patterns. Nevertheless, from a water resources perspective, virtual water can bring important insights across countries for improving water and land management globally, fostering adaptation strategies to climate change and to transboundary resource management.     

Trade liberalization and industrial structure in Spain: An applied general equilibrium analysis

We empirically evaluate the aggregate welfare effects and structural adjustment for the Spanish economy that would follow from trade liberalization with the European Economic Community. Recent theory suggests that the classical gains form more liberal trade relations could be amplified substantially if EEC liberalization permits Spanish industries to realize economies of scale. These effects depend upon the extent of trade creation and trade diversion resulting from preferential liberalization, which in turn depend on the existing patterns of Spanish resource allocation, trade, and comparative advantage. The estimated results are derived from disaggregated microeconomic model of the Spanish economy. We find that increasing returns can actually be beneficial or detrimental, depending upon the interactions between trade and policy toward domestic industry.     

IS AN EXPORT SUBSIDY A ROBUST TRADE POLICY RECOMMENDATION TOWARD A UNIONIZED DUOPOLY?

Brander and Spencer (1988) and Bandyopadhyay et al. (2000) imply that the robust trade policy recommendation toward a unionized duopoly is an export subsidy. In this paper, we show that we cannot get such a result even in the linear case if the opportunity cost of public funds is sufficiently high. However, if we consider the case where the domestic firm and the trade union lobby the government to set favorable trade policies by giving the government political contributions, then the result of robustness will be restored if the government cares about political contributions sufficiently relative to national welfare.     

Regime types,ideological leanings,and the natural resource curse

While many consider institutional quality as a central explanatory variable when finding what causes the variance in per capita GDP growth performance of resource-abundant countries, this paper attempts to focus on more structural factors: regime type and its ideological approaches to economic policy. Several joint effects of natural resource abundance and regime type on growth are found. The natural resource curse is likely to be more severe in authoritarian regimes than democratic regimes. Among democracies, it is found that the natural resource curse is more salient in presidential regimes than in parliamentary regimes. This paper also suggests that the natural resource curse is more likely when a certain type of democratic regime coincides with a particular ideological orientation of the regime with respect to economic policy. Presidential democracies with left-wing economic policy are found to be least growth enhancing among the combinations between regime type and its economic ideology offered, given similar levels of natural resource abundance.     

The gains from trade revisited

This paper revisits the issue of whether countries gain more from trading with countries that are similar to themselves, or with countries that are different. A model based on relative endowment and technological differences across countries is developed. The main result is that a country may experience a region of increasing gains from trade as its trading partner becomes more similar to itself in terms of relative endowments. The model also predicts that for countries with sufficiently similar relative endowments, both factors of production may experience gains from trade.     

Does trade weaken product standards?

We investigate the effects of trade on national minimum quality standards for a product whose quality is unobservable to consumers prior to purchase. Two standard‐setting regimes are considered: (1) where the regulatory authority takes the trade share as given; and (2) where the regulatory authority takes full account of its ability to influence the trade share. We find that standards are not a protectionist instrument in this model, the usual gains from trade apply if standards are maintained at their autarky values, trade can cause private standards to be adjusted in a welfare reducing way, and the welfare of a country is higher if its regulatory authority adopts regime (2) rather than (1).     

The effect of subsistence on collapse and institutional adaptation in population–resource societies

We extend the Brander–Taylor model of population and resource development in an isolated society by adding a resource subsistence requirement to people's preferences. This improves plausibility; amplifies population overshoot and collapse, and can destabilize the steady state; and allows for complete cessation of non-harvesting activities, in line with archaeological evidence for many societies. We then use bifurcation techniques to give a global analysis of four types of institutional adaptation: an ad valorem resource tax, and quotas on total resource harvest, total harvest effort and per capita effort. In all cases, we find that a higher subsistence requirement makes it harder, or often impossible, for adaptation to avoid overshoot and collapse.     

Should Commodity Exporters Peg to the Export Price?

To account for the specific situation of commodity exporters, pegging to export prices (PEP) has been proposed elsewhere as an alternative to other conventional monetary regimes such as an exchange rate peg or inflation targeting. PEP is supposed to deliver automatic accommodation to terms‐of‐trade shocks, while retaining the credibility gain from a nominal anchor. This paper analyzes the PEP proposal in a dynamic general‐equilibrium model and compares it with a standard Taylor rule, consumer price index (CPI)‐level targeting and a nominal exchange rate peg. Judged by the degree of output stabilization, PEP performs very similar to CPI targeting for export demand as well as domestic demand shocks and underperforms in the case of shocks to the export price. The results suggest that PEP is not superior to conventional CPI targeting from a macroeconomic stabilization perspective.     

Renewable resources and the gains from trade

The Brander-Taylor small, open-economy model of trade in a renewable resource and other goods is modified to allow for diminishing returns in the other goods sector. It is shown that opening up for trade may result in steady-state gains from trade, even when there is open access to the resource and the country does not specialize fully in resource extraction. It is also shown that transition to optimal management, with price-taking behaviour, may result in a welfare loss.
Resources renouvelables et gains en provenance du commerce international. L'auteur modifie le modèle Brander-Taylor de commerce international d'une ressource renouvelable et d'autres biens dans le cas d'une petite économie ouverte afin de tenir compte des rendements décroissants dans le secteur des autres biens. On montre que I'ouverture au commerce international peut entraîner des gains en provenance de l'échange international en régime permanent, et ce même quand l'accès à la ressource est ouvert et que le pays ne se spécialise pas dans l'extraction de la ressource. On montre que dans la période de transition vers un management optimal, quand il y a ajustement aux prix de marché, il peut y avoir perte de bien-être.