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Extraction Costs in the Theory of Exhaustible Resources

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  • Robert M. Solow
  • Frederic Y. Wan

Abstract

This paper has two objectives. First, it reformulates the theory of optimal use of an exhaustible resource with more attention to the costs of extraction than has been customary in the literature. The output and shadow-price implications of optimal extraction are studied under these broader assumptions. Second, the paper provides some numerical solutions of a simple two-grade case, to give some feeling for the quantitative importance of changes in the supply of exhaustible resources. Our most striking result is, in fact, the suggestion that relatively large changes in resource availability generate very small changes in the sustainable level of final consumption.

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File URL: http://links.jstor.org/sici?sici=0361-915X%28197623%297%3A2%3C359%3AECITTO%3E2.0.CO%3B2-Y&origin=repec
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Bibliographic Info

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

Volume (Year): 7 (1976)
Issue (Month): 2 (Autumn)
Pages: 359-370

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Handle: RePEc:rje:bellje:v:7:y:1976:i:autumn:p:359-370

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Citations

RePEc Biblio mentions

As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > Environmental and Natural Resource Economics > Resource Economics
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Cited by:
  1. Hodjat Ghadimi, 2006. "A Dynamic CGE Analysis of Exhaustible Resources: The Case of an Oil Exporting Developing Country," Working Papers 200607, Regional Research Institute, West Virginia University.
  2. Amigues, J.-P. & Favard, P. & Gaudet, G. & Moreaux, M., 1996. "On The Optimal Order of Natural Resourse Use When the Capacity of the Inexhaustible Substitute is Limited," Papers 96.431, Toulouse - GREMAQ.
  3. Ronald H. Schmidt, 1988. "Hotelling's rule repealed? An examination of exhaustible resource pricing," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 41-54.
  4. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298 Elsevier.
  5. Antonios Antypas & Phoebe Koundouri & Nikolaos Kourogenis, 2013. "Oscillatory Versus Quadratic Trends in Natural Resource Commodity Prices," DEOS Working Papers 1305, Athens University of Economics and Business.
  6. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
  7. Devarajan, Shantayanan & Fisher, Anthony C, 1981. "Hotelling's "Economics of Exhaustible Resources": Fifty Years Later," Journal of Economic Literature, American Economic Association, vol. 19(1), pages 65-73, March.
  8. Antonios Antypas & Phoebe Koundouri & Nikolaos Kourogenis, 2013. "Hotelling Rules: Oscillatory Versus Quadratic Trends in Natural Resource Prices," Grantham Research Institute on Climate Change and the Environment Working Papers 126, Grantham Research Institute on Climate Change and the Environment.

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