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Interactive dynamics between natural and man-made assets: The impact of external shocks

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  • López, Ramón
  • Schiff, Maurice

Abstract

This paper studies a two-sector economy in which one of the sectors (the “commodity sector”) depends in part on the exploitation of a renewable natural resource and examines the issue in an economy-wide context where both natural resources and a man-made asset change endogenously over time. We show that under an open access resource regime: i) a resource-rich, capital-poor economy may experience a “natural resource curse” phase and under certain conditions, may even follow a non-sustainable path leading to complete natural resource depletion; ii) a labor inflow results in a higher steady-state per capita income, with unchanged natural resources, though it makes the economy more prone to reach a path that converges to resource collapse; iii) the introduction of a small import tariff or export tax results in larger steady-state natural resources and commodity output and renders the economy less vulnerable to resource collapse. We also contrast the open access case with the other polar case of perfect property rights, showing that in this case the economy experiences neither a resource curse nor a resource collapse.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 104 (2013)
Issue (Month): C ()
Pages: 1-15

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Handle: RePEc:eee:deveco:v:104:y:2013:i:c:p:1-15

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Web page: http://www.elsevier.com/locate/devec

Related research

Keywords: Natural resources; Physical capital; Growth; Out-of-steady state dynamics; Resource curse;

References

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  1. Jeffrey A. Frankel, 2010. "The Natural Resource Curse: A Survey," NBER Working Papers 15836, National Bureau of Economic Research, Inc.
  2. Brander, James A & Taylor, M Scott, 1998. "The Simple Economics of Easter Island: A Ricardo-Malthus Model of Renewable Resource Use," American Economic Review, American Economic Association, vol. 88(1), pages 119-38, March.
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  4. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, December.
  5. Larson, Donald F. & Nash, John, 2010. "Resource management and the effects of trade on vulnerable places and people : lessons from six case studies," Policy Research Working Paper Series 5258, The World Bank.
  6. DE LA CROIX, David & DOTTORI, Davide, . "Easter Island's collapse: a tale of a population race," CORE Discussion Papers RP -2062, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Lopez, Ramon, 1997. "Environmental externalities in traditional agriculture and the impact of trade liberalization: the case of Ghana," Journal of Development Economics, Elsevier, vol. 53(1), pages 17-39, June.
  8. Smulders, Sjak & van Soest, Daan & Withagen, Cees, 2004. "International trade, species diversity, and habitat conservation," Journal of Environmental Economics and Management, Elsevier, vol. 48(2), pages 891-910, September.
  9. Reuveny, Rafael & Decker, Christopher S., 2000. "Easter Island: historical anecdote or warning for the future?," Ecological Economics, Elsevier, vol. 35(2), pages 271-287, November.
  10. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124.
  11. Edward B. Barbier, 2005. "Natural Resource-Based Economic Development in History," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 6(3), pages 103-152, July.
  12. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
  13. Naoto Jinji, 2006. "International trade and terrestrial open-access renewable resources in a small open economy," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 790-808, August.
  14. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
  15. Anthony Scott, 1955. "The Fishery: The Objectives of Sole Ownership," Journal of Political Economy, University of Chicago Press, vol. 63, pages 116.
  16. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August.
  17. Joseph E. Stiglitz, 1991. "The Invisible Hand and Modern Welfare Economics," NBER Working Papers 3641, National Bureau of Economic Research, Inc.
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