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Does the Acquisition of Mines by Firms in Resource-importing Countries Decrease Resource Prices?

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  • HIGASHIDA Keisaku
  • MORITA Tamaki
  • MANAGI Shunsuke
  • TAKARADA Yasuhiro

Abstract

This paper examines both theoretically and empirically the effects of the acquisition of mines by firms in resource-importing countries on resource prices. In the theoretical part, we consider a simple two-period model. We demonstrate that the acquisition of mines may increase either present or future resource prices. This implies that the consumption of resources in either period may decrease. Strategic behavior of a resource-mining firm, demand for final goods, and extraction costs play key roles. In the empirical part, using a dynamic panel model and oil price data, we estimate the effect of the acquisition of mines on resource prices. We find that prices in the present period increase, while those in the future period decrease.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 13073.

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Length: 33 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:eti:dpaper:13073

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  1. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  2. Sadorsky, Perry A., 1992. "Industry size and 'destructive competition' in cournot oligopoly models of exhaustible resource exploration and extraction," Resources and Energy, Elsevier, vol. 14(3), pages 249-257, September.
  3. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  4. Gilbert, Richard J. & Goldman, Steven M., 1978. "Potential competition and the monopoly price of an exhaustible resource," Journal of Economic Theory, Elsevier, vol. 17(2), pages 319-331, April.
  5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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