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Specialization and Nonrenewable Resources: Ricardo Meets Ricardo

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Author Info
Ujjayant Chakravorty () (Department of Economics, Emory University)
Darrell Krulce (QUALLCOM, Inc., San Diego)
James Roumasset () (Department of Economics, University of Hawaii at Manoa)

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Abstract

The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_04-1.pdf
File Format: application/pdf
File Function: First version, 2004
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Publisher Info
Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200401.

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Length: 52 pages
Date of creation: 2004
Date of revision:
Publication status: Forthcoming in the Journal of Economic Control and Dynamics
Handle: RePEc:hai:wpaper:200401

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Related research
Keywords: Dynamic comparative advantage; energy; non-renewable resources; multiple demands; Hotelling;

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Find related papers by JEL classification:
D9 - Microeconomics - - Intertemporal Choice and Growth
Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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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.:
  1. William D. Nordhaus, 1973. "The Allocation of Energy Resources," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1973-3), pages 529-576. [Downloadable!]
  2. Lewis, Tracy R, 1982. "Sufficient Conditions for Extracting Least Cost Resource First," Econometrica, Econometric Society, vol. 50(4), pages 1081-83, July. [Downloadable!] (restricted)
  3. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1201-34, December.
  4. Benveniste, L. M. & Scheinkman, J. A., 1982. "Duality theory for dynamic optimization models of economics: The continuous time case," Journal of Economic Theory, Elsevier, vol. 27(1), pages 1-19, June. [Downloadable!] (restricted)
  5. Kemp, Murray C & Long, Ngo Van, 1980. "On Two Folk Theorems Concerning the Extraction of Exhaustible Resources," Econometrica, Econometric Society, vol. 48(3), pages 663-73, April. [Downloadable!] (restricted)
  6. Geoffrey Heal, 1976. "The Relationship Between Price and Extraction Cost for a Resource with a Backstop Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 371-378, Autumn. [Downloadable!] (restricted)
  7. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, vol. 47(3), pages 727-32, May. [Downloadable!] (restricted)
  8. Gerard Gaudet & Michel Moreaux & Stephen W. Salant, 2001. "Intertemporal Depletion of Resource Sites by Spatially Distributed Users," American Economic Review, American Economic Association, vol. 91(4), pages 1149-1159, September. [Downloadable!] (restricted)
  9. Epstein, Larry G., 1978. "The Le Chatelier Principle in optimal control problems," Journal of Economic Theory, Elsevier, vol. 19(1), pages 103-122, October. [Downloadable!] (restricted)
  10. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May. [Downloadable!] (restricted)
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  11. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-52, November. [Downloadable!] (restricted)
  12. Farzin, Y H, 1992. "The Time Path of Scarcity Rent in the Theory of Exhaustible Resources," Economic Journal, Royal Economic Society, vol. 102(413), pages 813-30, July. [Downloadable!] (restricted)
  13. Harberger, Arnold C, 1993. "The Search for Relevance in Economics," American Economic Review, American Economic Association, vol. 83(2), pages 1-16, May.
  14. Halvorsen, Robert & Smith, Tim R, 1991. "A Test of the Theory of Exhaustible Resources," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 123-40, February. [Downloadable!] (restricted)
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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. GAUDET Gérard & MOREAUX Michel & WITHAGEN Cees, 2006. "The Alberta dilemma: Optimal sharing of a water resource by an agricultural and an oil sector," Working Papers 06.06.199, LERNA, University of Toulouse. [Downloadable!]
    Other versions:
  2. Eric Iksoon Im & Ujjayant Chakravorty & James Roumasset, 2004. "Discontinuous Extraction of a Nonrenewable Resource," Emory Economics 0406, Department of Economics, Emory University (Atlanta). [Downloadable!]
    Other versions:
  3. LAFFORGUE Gilles & MAGNE Bertrand & MOREAUX Michel, 2007. "Energy Substitutions, Climate change and Carbon sinks," Working Papers 07.01.222, LERNA, University of Toulouse. [Downloadable!]
    Other versions:
  4. Pitafi, Basharat A. & Roumasset, James A., 2006. "Integrated management of multiple aquifers with subsurface flows and inter-district water transport," 2006 Annual meeting, July 23-26, Long Beach, CA 21473, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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