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Specialization and non-renewable resources: Ricardo meets Ricardo

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  • Chakravorty, Ujjayant
  • Krulce, Darrell
  • Roumasset, James

Abstract

The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 29 (2005)
Issue (Month): 9 (September)
Pages: 1517-1545

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Handle: RePEc:eee:dyncon:v:29:y:2005:i:9:p:1517-1545

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  1. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
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  11. Geoffrey Heal, 1976. "The Relationship Between Price and Extraction Cost for a Resource with a Backstop Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 371-378, Autumn.
  12. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-52, November.
  13. Epstein, Larry G., 1978. "The Le Chatelier Principle in optimal control problems," Journal of Economic Theory, Elsevier, vol. 19(1), pages 103-122, October.
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  15. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-34, December.
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Cited by:
  1. GAUDET, Gérard & MOREAUX, Michel & WITHAGEN, Cees, 2005. "The Alberta Dilemma: Optimal Sharing of a Water Resource by an Agricultural and an Oil Sector," Cahiers de recherche 2005-18, Universite de Montreal, Departement de sciences economiques.
  2. LAFFORGUE Gilles & MAGNE Bertrand & MOREAUX Michel, 2007. "Energy Substitutions, Climate change and Carbon sinks," LERNA Working Papers 07.01.222, LERNA, University of Toulouse.
  3. Eric Iksoon Im & Ujjayant Chakravorty & James Roumasset, 2005. "Discontinuous Extraction of a Nonrenewable Resource," Working Papers 200509, University of Hawaii at Manoa, Department of Economics.
  4. James Roumasset & Christopher Wada, 2011. "Ordering Renewables: Groundwater, Recycling, and Desalination," Working Papers 201105, University of Hawaii at Manoa, Department of Economics.
  5. Roumasset, James A. & Wada, Christopher A., 2012. "Ordering the extraction of renewable resources: The case of multiple aquifers," Resource and Energy Economics, Elsevier, vol. 34(1), pages 112-128.
  6. Pitafi, Basharat A.K. & Roumasset, James A., 2006. "Integrated management of multiple aquifers with subsurface flows and inter-district water transport," 2006 Annual meeting, July 23-26, Long Beach, CA 21473, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. James Roumasset & Christopher Wada, 2009. "Renewable Resource Management with Alternative Sources: the Case of Multiple Aquifers and a "Backstop" Resource," Working Papers 200913, University of Hawaii at Manoa, Department of Economics.
  8. James Roumasset & Christopher Wada, 2013. "Ordering Extraction from Multiple Aquifers," Working Papers 2013-12, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.

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