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A Two-Country Model of Renewable Resource Sharing

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Author Info
Stephane Pallage () (Center for Research on Economic Fluctuations and Employment, UQAM)

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Abstract

In this paper, I investigate the sustainability of optimal cooperative policies for the replenishment of a renewable resource shared by two countries. If the development of these nations constitutes a threat to the common stock, under what conditions can a social best (a Pareto optimum) be sustainable? The question is addressed within a two-country neo-classical growth model with externality. In the worst scenario, the poorer country leaves the replenishment burden to the rich. International transfers are then non-existent. Nevertheless, in absence of a commitment mechanism, it is still possible to reach a social best provided the countries' patience, expressed by their discount factor, is high enough. The strategies that implement these Pareto optima are self-enforcing trigger-strategies that involve positive transfers of wealth between countries and a threat to autarky in case of defection. Sustainable Pareto optima are then identified in a specific case of environmental resource (clean air) and for a calibration of the model economies to the United States and a country five times poorer. An estimate of the transfers required to implement these social optima is provided.

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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 41.

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Length: 23 pages
Date of creation: May 1996
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Handle: RePEc:cre:crefwp:41

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Related research
Keywords: Renewable resources; pollution; neo-classical growth model; sustainable Pareto optima;

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Find related papers by JEL classification:
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  5. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March. [Downloadable!] (restricted)
  6. Giannias, Dimitrios A, 1989. "Consumer Benefit from Air Quality Improvements," Applied Economics, Taylor and Francis Journals, vol. 21(8), pages 1099-1108, August.
  7. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June. [Downloadable!] (restricted)
  8. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Blackwell Publishing, vol. 38(113), pages 1-12, January. [Downloadable!] (restricted)
  9. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  10. Atkeson, Andrew, 1991. "International Lending with Moral Hazard and Risk of Repudiation," Econometrica, Econometric Society, vol. 59(4), pages 1069-89, July. [Downloadable!] (restricted)
  11. Albert Marcet & Ramon Marimon, 1992. "Communication, commitment, and growth," Discussion Paper / Institute for Empirical Macroeconomics 74, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  12. Coleman, Wilbur John, II, 1990. "Solving the Stochastic Growth Model by Policy-Function Iteration," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(1), pages 27-29, January.
  13. Dutta Prajit K., 1995. "A Folk Theorem for Stochastic Games," Journal of Economic Theory, Elsevier, vol. 66(1), pages 1-32, June. [Downloadable!] (restricted)
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  15. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January. [Downloadable!] (restricted)
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  16. Dutta, P.K. & Sundaram, R.K., 1990. "Stochastic Games Of Resource Allocation: Existence Theorems For Discounted And Undiscounted Models," RCER Working Papers 241, University of Rochester - Center for Economic Research (RCER).
  17. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring. [Downloadable!] (restricted)
  18. Harris, Christopher J, 1985. "Existence and Characterization of Perfect Equilibrium in Games of Perfect Information," Econometrica, Econometric Society, vol. 53(3), pages 613-28, May. [Downloadable!] (restricted)
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  21. Jess Benhabib & Aldo Rustichini, 1991. "Social Conflict," Discussion Papers 937, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stephane Pallage & Christian Zimmermann, 2000. "Buying Out Child Labor?," Cahiers de recherche CREFE / CREFE Working Papers 123, CREFE, Université du Québec à Montréal. [Downloadable!]
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