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International Trade and Open Access Renewable Resources: The Small Open Economy Case

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  • James A. Brander
  • M. Scott Taylor

Abstract

This paper develops a two-sector general equilibrium model of an economy with an open access renewable resource. We characterize the autarkic steady state, showing that autarky prices (and 'comparative advantage') are determined by the ratio of intrinsic resource growth to labor. Under free trade, steady state trade and production patterns for a small open economy are determined by whether the resource good's world price exceeds its autarky price. Strikingly, if the small country exports the resource good while remaining diversified, then steady-state utility is lower than in autarky, and increases in the world price of exports are welfare-reducing.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5021.

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Date of creation: Feb 1995
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Publication status: published as Canadian Journal of Economics, Vol. 30, no. 3 (August 1997): 526-552.
Handle: RePEc:nbr:nberwo:5021

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  1. Tawada, Makoto, 1982. "A Note on International Trade with a Renewable Resource," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(1), pages 157-63, February.
  2. Kemp, Murray C. & Van Long, Ngo, 1984. "The role of natural resources in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 8, pages 367-417 Elsevier.
  3. Copes, Parzival, 1970. "The Backward-Bending Supply Curve Of The Fishing Industry," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(1), pages 69-77, February.
  4. James R. Markusen, 1976. "Production and Trade from International Common Property Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 9(2), pages 309-19, May.
  5. McRae, James J., 1978. "Optimal and competitive use of replenishable natural resources by open economies," Journal of International Economics, Elsevier, vol. 8(1), pages 29-54, February.
  6. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December.
  7. Charles F. Manson & Stephen Polasky, 1993. "Entry Deterrence In The Commons," Boston College Working Papers in Economics 209, Boston College Department of Economics.
  8. Munro, Gordon R. & Scott, Anthony D., 1985. "The economics of fisheries management," Handbook of Natural Resource and Energy Economics, in: A. V. Kneeseā€  & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 2, chapter 14, pages 623-676 Elsevier.
  9. Loayza, E.A. & Sprague, L.M., 1992. "A STrategy for Fisheries Development," World Bank - Discussion Papers 135, World Bank.
  10. Chichilnisky, G., 1991. "Global Environment and North-South Trade," Discussion Papers 1991_45, Columbia University, Department of Economics.
  11. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, number 9780521297615, April.
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