Depletion and development: natural resource supply with endogenous field opening
AbstractThis paper develops a model in which supply of a non-renewable resource can adjust through two margins: the rate of depletion and the rate of field opening.� Faster depletion of existing fields means that less of the resource can ultimately be extracted, and optimal depletion of open fields follows a (modified) Hotelling rule.� Opening a new field involves sinking a capital cost, and the timing of field opening is chosen to maximize the present value of the field.� Output dynamics depend on both depletion and field opening, and supply responses to price changes are studied.� In contrast to Hotelling, the long run equilibrium rate of growth of prices is independent of the rate of intereset, depending instead on characteristics of demand and geologically determined supply.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 554.
Date of creation: 01 Jun 2011
Date of revision:
Natural resource; Depletion; Hotelling; Fossil fuel; Carbon tax;
Other versions of this item:
- Anthony J. Venables, 2011. "Depletion and Development: Natural Resource Supply with Endogenous Field Opening," CESifo Working Paper Series 3608, CESifo Group Munich.
- Anthony J. Venables, 2011. "Depletion and Development: Natural resource supply with endogenous field opening," OxCarre Working Papers 062, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-02 (All new papers)
- NEP-ENE-2011-07-02 (Energy Economics)
- NEP-ENV-2011-07-02 (Environmental Economics)
- NEP-RES-2011-07-02 (Resource Economics)
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