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Optimal Substitution Of Renewable And Nonrenewable Natural Resources In Production

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Author Info
Emilio Cerdá (Universidad Complutense de Madrid)
Francisco J. André (Universidad de Alicante)

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Abstract

A theoretical model is presented in order to study the optimal combination of natural resources, used as inputs, taking into account their natural growth ability and the technical possibilities of input substitution. The model enables us to consider renewable resources, nonrenewable, or both. The relative use of resources evolves through time according to the difference between both resources' natural growth and technological flexibility, as measured by the elasticity of substitution of the production function. Output evolves according to a version of the traditional Keynes-Ramsey rule, where the marginal productivity of capital is substituted by the ''marginal productivity of natural capital'', that is a combination of both resources' marginal growth weighted by each resource return in production.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2001-14.pdf
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File Function: Fisrt version / Primera version, 2001
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Publisher Info
Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2001-14.

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Length: 25 pages
Date of creation: May 2001
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Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2001-14

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Keywords: Renewable Resources Nonrenewable Resources Production Optimal Control.

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  1. Pindyck, Robert S, 1978. "The Optimal Exploration and Production of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 841-61, October. [Downloadable!] (restricted)
  2. Hartwick, John M., 1978. "Investing returns from depleting renewable resource stocks and intergenerational equity," Economics Letters, Elsevier, vol. 1(1), pages 85-88. [Downloadable!] (restricted)
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  3. Weinstein, Milton C & Zeckhauser, Richard J, 1975. "The Optimal Consumption of Depletable Natural Resources," The Quarterly Journal of Economics, MIT Press, vol. 89(3), pages 371-92, August. [Downloadable!] (restricted)
  4. Hartwick, John M, 1978. "Substitution among Exhaustible Resources and Intergenerational Equity," Review of Economic Studies, Blackwell Publishing, vol. 45(2), pages 347-54, June. [Downloadable!] (restricted)
  5. Devarajan, Shantayanan & Fisher, Anthony C, 1981. "Hotelling's "Economics of Exhaustible Resources": Fifty Years Later," Journal of Economic Literature, American Economic Association, vol. 19(1), pages 65-73, March. [Downloadable!] (restricted)
  6. John M. Hartwick, 1990. "Natural Resources, National Accounting and Economic Depreciation," Working Papers 771, Queen's University, Department of Economics.
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  7. Swallow, Stephen K., 1990. "Depletion of the environmental basis for renewable resources: The economics of interdependent renewable and nonrenewable resources," Journal of Environmental Economics and Management, Elsevier, vol. 19(3), pages 281-296, November. [Downloadable!] (restricted)
  8. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September. [Downloadable!] (restricted)
  9. Pindyck, Robert S, 1981. " The Optimal Production of an Exhaustible Resource When Price is Exogenous and Stochastic," Scandinavian Journal of Economics, Blackwell Publishing, vol. 83(2), pages 277-88.
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  10. Stiglitz, Joseph E. & Dasgupta, Partha, 1982. "Market structure and resource depletion: A contribution to the theory of intertemporal monopolistic competition," Journal of Economic Theory, Elsevier, vol. 28(1), pages 128-164, October. [Downloadable!] (restricted)
  11. Hartwick, John M. & Kemp, Murray C. & Van Long, Ngo, 1986. "Set-up costs and theory of exhaustible resources," Journal of Environmental Economics and Management, Elsevier, vol. 13(3), pages 212-224, September. [Downloadable!] (restricted)
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  12. Weitzman, Martin L., 1976. "The optimal development of resource pools," Journal of Economic Theory, Elsevier, vol. 12(3), pages 351-364, June. [Downloadable!] (restricted)
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