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A Dynamic CGE Analysis of Exhaustible Resources: The Case of an Oil Exporting Developing Country

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  • Hodjat Ghadimi

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    (Design & Merchandising, West Virginia University)

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    Abstract

    Extensive literature concerned with optimal depletion of an exhaustible resource, with only a few exceptions, ignores the economy-wide and sectoral distribution effects of resource depletion. This paper presents a dynamic computable general equilibrium model to link the underlying natural resource base to the economic performance. The model consists of an intra-temporal price endogenous multisectoral model of a market economy, embedded in an inter-temporal optimal growth and development model. This general equilibrium approach captures the economy-wide and sectoral distribution effects of resource depletion. The model is benchmarked for the Iranian data and is used to examine the issues related to optimal extraction of an exhaustible resource, optimal savings in the economy, and the allocation of investment funds.

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    File URL: http://rri.wvu.edu/wp-content/uploads/2012/11/ghadimiwp2006-7.pdf
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    Bibliographic Info

    Paper provided by Regional Research Institute, West Virginia University in its series Working Papers with number 200607.

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    Length: 50 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:rri:wpaper:200607

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    Related research

    Keywords: CGE; Computable general equilibrium; exhaustible resources; oil;

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    References

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    1. Robinson, Sherman & Roland-Holst, David W., 1988. "Macroeconomic structure and computable general equilibrium models," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 353-375.
    2. Aarrestad, Jostein, 1978. "Optimal savings and exhaustible resource extraction in an open economy," Journal of Economic Theory, Elsevier, vol. 19(1), pages 163-179, October.
    3. repec:fth:harver:1511 is not listed on IDEAS
    4. Devarajan, Shantayanan & Go, Delfin S., 1998. "The Simplest Dynamic General-Equilibrium Model of an Open Economy," Journal of Policy Modeling, Elsevier, vol. 20(6), pages 677-714, December.
    5. Robert M. Solow & Frederic Y. Wan, 1976. "Extraction Costs in the Theory of Exhaustible Resources," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 359-370, Autumn.
    6. 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.
    7. Pindyck, Robert S, 1978. "Gains to Producers from the Cartelization of Exhaustible Resources," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 238-51, May.
    8. Peterson, Frederick M & Fisher, Anthony C, 1977. "The Exploitation of Extractive Resources: A Survey," Economic Journal, Royal Economic Society, vol. 87(348), pages 681-721, December.
    9. Bergman, Lars, 1990. "Energy and environmental constraints on growth: A CGE modeling approach," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 671-691.
    10. Jorgenson, Dale W & Yun, Kun-Young, 1986. " The Efficiency of Capital Allocation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 85-107.
    11. de Melo, Jaime & Robinson, Sherman, 1989. "Product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies," Journal of International Economics, Elsevier, vol. 27(1-2), pages 47-67, August.
    12. Lewis, Jeffrey D., 1992. "Financial repression and liberalization in a general equilibrium model with financial markets," Journal of Policy Modeling, Elsevier, vol. 14(2), pages 135-166, April.
    13. Devarajan, Shantayanan & Fisher, Anthony C, 1982. "Exploration and Scarcity," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1279-90, December.
    14. David Levhari & Nissan Liviatan, 1977. "Notes on Hotelling's Economics of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 177-92, May.
    15. Bergman, Lars, 1988. "Energy Policy Modeling: A survey of general equilibrium approaches," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 377-399.
    16. Devaragan, Shantayanan & Lewis, Jeffrey D. & Robinson, Sherman, 1990. "Policy lessons from trade-focused, two-sector models," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 625-657.
    17. Pereira, Alfredo M. & Shoven, John B., 1988. "Survey of dynamic computational general equilibrium models for tax policy evaluation," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 401-436.
    18. Devarajan, Shantayanan, 1988. "Natural resources and taxation in computable general equilibrium models of developing countries," Journal of Policy Modeling, Elsevier, vol. 10(4), pages 505-528.
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    Cited by:
    1. Hodjat Ghadimi, 2007. "Global Impact of Energy Use in Middle East Oil Economies: A Modeling Framework for Analyzing Technology-Energy-Environment-Economy Chain," Working Papers 200705, Regional Research Institute, West Virginia University.
    2. Hodjat Ghadimi, 2008. "Energy in a Resource-based Regional Economy: A Dynamic General Equilibrium Analysis," Working Papers 200802, Regional Research Institute, West Virginia University.

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