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An Econometric Model of the World Copper Industry


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  • Franklin M. Fisher
  • Paul H. Cootner
  • Martin N. Baily
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    This paper discusses a complete model of the world copper economy. Supply equations for primary copper are estimated for four principal producing countries and the rest of the world; demand equations are estimated for the United States, Europe, Japan, and the Rest-of-World. Scrap supply equations are estimated for the U.S. and non-U.S. sectors as are price adjustment equations. The model is closed with a net input equation for the United States and various identities. The two separate copper markets (U.S. and non-U.S.) are converted by inputs, the generally free London Metal Exchange and scrap markets, and the price-setting behavior of U.S. producers. The copper market is found to be characterized by low short-run but very high long-run price elasticities, making for considerable sensitivity to exogenous forces. The model, fitted to 1948-1969 data, is used for forecasting and simulation experiments. Generally, short-run forecasts are good and longer-run forecasts are not very satisfactory. Perhaps the most interesting finding of the simulation is the prediction that Chilean output would be very sluggish even in the absence of nationalization and that Chilean revenues would be substantially increased were the Chilean government to increase domestic mine production and to allow world prices to adjust accordingly.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal Bell Journal of Economics.

    Volume (Year): 3 (1972)
    Issue (Month): 2 (Autumn)
    Pages: 568-609

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    Handle: RePEc:rje:bellje:v:3:y:1972:i:autumn:p:568-609

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    Cited by:
    1. Mansikkasalo, Anna & Lundmark, Robert & Söderholm, Patrik, 2014. "Market behavior and policy in the recycled paper industry: A critical survey of price elasticity research," Forest Policy and Economics, Elsevier, vol. 38(C), pages 17-29.
    2. Alfredo Dammert, 1980. "Planning Investments in the Copper Sector in Latin America," NBER Chapters, in: Commodity Markets and Latin American Development -- A Modeling Approach, pages 65-83 National Bureau of Economic Research, Inc.
    3. John T. Cuddington & Abdel M. Zellou, 2012. "A Simple Mineral Market Model: Can it produce Super Cycles in prices?," Working Papers 2012-05, Colorado School of Mines, Division of Economics and Business.
    4. Pothen, Frank, 2014. "Dynamic market power in an exhaustible resource industry: The case of rare earth elements," ZEW Discussion Papers 14-005, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Francesco Nicolli & Nick Johnstone & Patrik Söderholm, 2012. "Resolving failures in recycling markets: the role of technological innovation," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(3), pages 261-288, July.
    6. Pothen, Frank, 2013. "The metal resources (METRO) model: A dynamic partial equilibrium model for metal markets applied to rare earth elements," ZEW Discussion Papers 13-112, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.


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