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A Test of the Hotelling Rule Using Old-Growth Timber Data

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Author Info

  • Livernois, J.
  • Thille, H.
  • Zhang, X.

Abstract

The paper tests Hotelling's prediction that scarcity rent for a non-renewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old-growth timber, a resource that is effectively non-renewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling rule that we derive is not rejected in several of our specifications.

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Bibliographic Info

Paper provided by University of Guelph, Department of Economics and Finance in its series Working Papers with number 2003-4.

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Length: 25 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:gue:guelph:2003-4

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Postal: Guelph, Ontario, N1G 2W1
Phone: (519) 824-4120 ext. 53898
Fax: (519) 763-8497
Web page: https://www.uoguelph.ca/economics/
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References

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  4. John Hartwick, 1975. "Exploitation of Many Deposits of an Exhaustible Resource," Working Papers 182, Queen's University, Department of Economics.
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  8. Marshall, R.C. & Richard J.F., 1995. "Bider Collusion at Forest Service Timber Sales," Papers 7-95-3, Pennsylvania State - Department of Economics.
  9. Livernois, John R & Uhler, Russell S, 1987. "Extraction Costs and the Economics of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 195-203, February.
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  22. John Livernois & Patrick Martin, 2001. "Price, scarcity rent, and a modified r per cent rule for non-renewable resources," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 827-845, August.
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Citations

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Cited by:
  1. GĂ©rard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
  2. Caputo, Michael R., 2011. "A nearly complete test of a capital accumulating, vertically integrated, nonrenewable resource extracting theory of a competitive firm," Resource and Energy Economics, Elsevier, vol. 33(3), pages 725-744, September.
  3. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, 09.
  4. Ian Keay, 2010. "The Impact of Commodity Price Volatility on Resource Intensive Economies," Working Papers 1274, Queen's University, Department of Economics.
  5. Lisa Leinert, 2012. "Does the Oil Price Adjust Optimally to Oil Field Discoveries?," CER-ETH Economics working paper series 12/169, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  6. Markus Ludwig, . "The Visible Hand: National Oil Companies, Oil Supply and the Ermergence of the Hotelling Rent," Working papers 2012/11, Faculty of Business and Economics - University of Basel.
  7. Ian Keay, 2007. "Resource Rents and their Impact on Institutional and Economic Development," Working Papers 1143, Queen's University, Department of Economics.
  8. Abhijit Sharma & Kelvin G Balcombe & Iain M Fraser, 2009. "Non-renewable resource prices: Structural breaks and long term trends," Economics Bulletin, AccessEcon, vol. 29(2), pages 805-819.

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