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Relative Consumption and Resource Extraction

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Author Info
Francisco Alvarez-Cuadrado
Ngo Van Long ()

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Abstract

This paper presents a simple model of resource extraction where preferences are household's preferences depend on relative consumption levels. We identify two dimensions along which consumption externalities distort the efficient extraction of resources: (i) the static trade-off between consumption and effort, and (ii) the dynamic trade-off between current and future consumption. In general, households over-exploit the natural resource stocks, resulting in steady state stocks lower than the efficient stocks of resources that would be chosen by a benevolent central planner. We propose a tax mechanism to induce the first best outcome.

On présente un modèle d’exploitation d’une ressource naturelle dans lequel les ménages accordent une importance à la consommation relative, soit la différence entre leur consommation et celle de leur groupe de référence. On identifie deux dimensions de distorsion. Premièrement, il y a la distorsion dans le choix du niveau d’effort. Deuxièmement, il y a la distorsion dans le choix entre la consommation présente et la consommation dans le futur. En général, les ménages ont tendance à exploiter les ressources naturelles de facon excessive. Par conséquent, les stocks de ressources à l’état stationnaire sont plus petits que ceux qu’aurait choisis un planificateur central. On propose une règle de taxation qui assure les résultats optimaux.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 2008s-27.

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Date of creation: 01 Oct 2008
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Handle: RePEc:cir:cirwor:2008s-27

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Related research
Keywords: relative consumption; relative income hypothesis; permanent income hypothesis; consommation relative; revenue relative; l’hypothèse de la revenue permanente.;

Find related papers by JEL classification:
D62 - Microeconomics - - Welfare Economics - - - Externalities
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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