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Does Productive Capital Affect the Order of Resource Exploitation

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Author Info

  • Favard, P.

Abstract

The purpose of this paper is to show that in a general equilibrium framework it is not always optimal to exploit resources in strict sequence, beginning with the lowest cost deposit, even if it is possible to accumulate productive capital. Indeed if there is an exogenous upper bound on the flow of the substitute, it is always optimal to consume it simultaneously with a lower cost stock. Moreover, it may be optimal to consume the high-cost substitute before using a lower cost resource. Classification-JEL: Q3

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Bibliographic Info

Paper provided by LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1 in its series Cahiers du LASER (LASER Working Papers) with number 2001.01.

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Length: 8 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:mop:lasrwp:2001.01

Contact details of provider:
Postal: LASER, Faculté d'Economie, Avenue Raymond Dugrand, CS 79606, 34960 MONTPELLIER Cedex 2, France
Web page: http://www.laser.univ-montp1.fr
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Related research

Keywords: NATURAL RESOURCES ; SUBSTITUTE ; PRODUCTIVE CAPITAL ; GENERAL EQUILIBRIUM;

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References

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  1. Lewis, Tracy R, 1982. "Sufficient Conditions for Extracting Least Cost Resource First," Econometrica, Econometric Society, vol. 50(4), pages 1081-83, July.
  2. Amigues, J.-P. & Favard, P. & Gaudet, G. & Moreaux, M., 1996. "On The Optimal Order of Natural Resourse Use When the Capacity of the Inexhaustible Substitute is Limited," Papers 96.431, Toulouse - GREMAQ.
  3. 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.
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Cited by:
  1. Istvan, Bessenyei, 2005. "Does market value maximization affect the order of resource exploitation?," Economic Modelling, Elsevier, vol. 22(6), pages 1090-1104, December.
  2. GAUDET, Gérard & MOREAUX, Michel & WITHAGEN, Cees, 2005. "The Alberta Dilemma: Optimal Sharing of a Water Resource by an Agricultural and an Oil Sector," Cahiers de recherche 2005-18, Universite de Montreal, Departement de sciences economiques.
  3. Michel Moreaux & Francesco Ricci, 2005. "The simple analytics of developing resources from resources," Working Papers 24242, Institut National de la Recherche Agronomique, France.
  4. Gerlagh, Reyer & Lise, Wietze, 2005. "Carbon taxes: A drop in the ocean, or a drop that erodes the stone? The effect of carbon taxes on technological change," Ecological Economics, Elsevier, vol. 54(2-3), pages 241-260, August.
  5. Freni, Giuseppe, 2009. "Factor intensity and order of resource extraction," MPRA Paper 18790, University Library of Munich, Germany.
  6. Gilles Lafforgue & Bertrand Magne & Michel Moreaux, 2008. "Energy substitutions, climate change and carbon sinks," Working Papers 21821, Institut National de la Recherche Agronomique, France.

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