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Exhaustible Resource Allocation, Intergenerational Equity, and Sustainability

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  • Knapp, Keith C.

Abstract

An OLG model with exhaustible resources and solar energy is developed, and equilibrium time paths are characterized numerically using recursive methods. For the parameter values considered, resource prices increase over time, and extractions, output, and utility decline over time until a steady-state is reached. Decreasing the intertemporal elasticity of substitution or raising consumers' subjective discount rate hastens exhaustion of the resource stock. Market equilibrium can result in much quicker use of the stock than social optimality under a constant discount rate, with consequent higher utility for early generations and lower utility for future generations in contrast to social optimality.

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  • Knapp, Keith C., 1996. "Exhaustible Resource Allocation, Intergenerational Equity, and Sustainability," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(1), pages 60-67, April.
    • Handle: RePEc:cup:agrerw:v:25:y:1996:i:01:p:60-67_00
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    1. Howarth, Richard B., 1991. "Intergenerational competitive equilibria under technological uncertainty and an exhaustible resource constraint," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 225-243, November.
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    5. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    6. Coleman, Wilbur John, II, 1991. "Equilibrium in a Production Economy with an Income Tax," Econometrica, Econometric Society, vol. 59(4), pages 1091-1104, July.
    7. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-357, April.
    8. David R. F. Love, 1991. "Exhaustible Resources In An Overlapping Generations Economy," Working Paper 844, Economics Department, Queen's University.
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    Cited by:

    1. Wang, Xiaolin & Qiu, Yangyang & Chen, Jun & Hu, Xiangping, 2022. "Evaluating natural gas supply security in China: An exhaustible resource market equilibrium model," Resources Policy, Elsevier, vol. 76(C).

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