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Exogenous Productivity Shocks and Capital Investment in Common-pool Resources

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  • Fissel, Benjamin E
  • Glibert, Ben
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    Abstract

    We model exogenous technology shocks in common-pool industries using a compound Poisson process for total factor productivity. Rapid di�usion of exogenous innovations is typical in the commons, but technology is rarely modeled this way. Technology shocks lower the equilibrium resource stock while causing capital buildup based on transitory pro�ts with myopic expectations. The steady state changes from a stable node to a shifting focus with boom and bust cycles, even if only technology is uncertain. A �sheries application is developed, but the results apply to many settings with discontinuous changes in value and open access with costly exit.

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    File URL: http://www.escholarship.org/uc/item/1qp1g9ts.pdf;origin=repeccitec
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    Bibliographic Info

    Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt1qp1g9ts.

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    Date of creation: 23 Sep 2010
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    Handle: RePEc:cdl:ucsdec:qt1qp1g9ts

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    Related research

    Keywords: technology shocks; Social and Behavioral Sciences;

    References

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    1. Berck, Peter & Perloff, Jeffrey M, 1984. "An Open-Access Fishery with Rational Expectations," Econometrica, Econometric Society, vol. 52(2), pages 489-506, March.
    2. Ken Sennewald & Klaus Waelde, 2006. "“Itô’s Lemma“ and the Bellman Equation for Poisson Processes: An Applied View," CESifo Working Paper Series 1684, CESifo Group Munich.
    3. Homans, Frances R. & Wilen, James E., 1997. "A Model of Regulated Open Access Resource Use," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 1-21, January.
    4. Kerry Smith, V., 1972. "The implications of common property resources for technical change," European Economic Review, Elsevier, vol. 3(4), pages 469-479, December.
    5. Kenneth Hendricks & Dan Kovenock, 1989. "Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 164-182, Summer.
    6. Daniel R. Siegel, 1985. "Estimating Potential Social Losses from Market Failure: Oil Exploration in Alberta," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 537-552, Winter.
    7. Clark, Colin W & Clarke, Frank H & Munro, Gordon R, 1979. "The Optimal Exploitation of Renewable Resource Stocks: Problems of Irreversible Investment," Econometrica, Econometric Society, vol. 47(1), pages 25-47, January.
    8. Dale Squires, 1992. "Productivity Measurement in Common Property Resource Industries: An Application to the Pacific Coast Trawl Fishery," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 221-236, Summer.
    9. Baltagi, Badi H & Griffin, James M, 1988. "A General Index of Technical Change," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 20-41, February.
    10. Hannesson, Rognvaldur, 2007. "Growth accounting in a fishery," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 364-376, May.
    11. Pankaj Tandon, 1983. "Rivalry and the Excessive Allocation of Resources to Research," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 152-165, Spring.
    12. Dasgupta, Partha & Stiglitz, Joseph, 1980. "Industrial Structure and the Nature of Innovative Activity," Economic Journal, Royal Economic Society, vol. 90(358), pages 266-93, June.
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    Cited by:
    1. Fissel, Benjamin E. & Gilbert, Ben & LaRiviere, Jacob, 2013. "Technology adoption and diffusion with uncertainty in a commons," Economics Letters, Elsevier, vol. 120(2), pages 297-301.

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