Policy Rules for Exploitation of Renewable Resources: A Macroeconomic Perspective |
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Authors: | Anders Sørensen Tryggvi Thor Herbertsson |
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Affiliation: | (1) EPRU, Copenhagen Business School, Nansensgade 19, 5, DK-1366 Copenhagen K, Denmark;(2) Institute of Economic Studies, University of Iceland, Odda v/Sturlugata, IS-101 Reykjavik, Iceland;(3) University of Aarhus, Denmark |
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Abstract: | A fundamental problem for an economy based on a common property resource is the absence of a market to trade the resource. This implies that private costs will be below social costs. This paper investigates possible government interventions that correct for such distortions in a neoclassical growth model with a production externality in harvesting. The model predicts that the welfare of the representative household increases considerably when a Piguovian tax is implemented. The policy that replicates the command optimum is highly complex and changes over time. On the other hand, a large share of the maximum welfare increase is internalized by introducing a constant quantity tax, suggesting that the potential of such policies is high. |
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Keywords: | resource based growth resource rent problem of the commons |
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