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Value and depreciation of mineral resources over the very long run: An empirical contrast of different methods

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  • M. del Mar Rubio Varas

Abstract

The paper contrasts empirically the results of alternative methods for estimating the value and the depreciation of mineral resources. The historical data of Mexico and Venezuela, covering the period 1920s-1980s, is used to contrast the results of several methods. These are the present value, the net price method, the user cost method and the imputed income method. The paper establishes that the net price and the user cost are not competing methods as such, but alternative adjustments to different scenarios of closed and open economies. The results prove that the biases of the methods, as commonly described in the theoretical literature, only hold under the most restricted scenario of constant rents over time. It is argued that the difference between what is expected to happen and what actually did happen is for the most part due to a missing variable, namely technological change. This is an important caveat to the recommendations made based on these models.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 867.

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Date of creation: May 2005
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Handle: RePEc:upf:upfgen:867

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Value; depreciation; mineral assets; net price; user costs; imputed income; environmental accounts;

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  1. Sefton, J. A. & Weale, M. R., 1996. "The net national product and exhaustible resources: The effects of foreign trade," Journal of Public Economics, Elsevier, vol. 61(1), pages 21-47, July.
  2. Tom Crowards, 1996. "Natural resource accounting," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 7(3), pages 213-241, April.
  3. Weitzman, Martin L, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 156-62, February.
  4. Santopietro, George D., 1998. "Alternative methods for estimating resource rent and depletion cost: the case of Argentina's YPF," Resources Policy, Elsevier, vol. 24(1), pages 39-48, March.
  5. Davis, Graham A. & Moore, David J., 2000. "Valuing mineral stocks and depletion in green national income accounts," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 109-127, February.
  6. Vincent, Jeffrey R., 2000. "Green accounting: from theory to practice," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 13-24, February.
  7. Martin L. Weitzman, 1999. "Pricing The Limits To Growth From Minerals Depletion," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 691-706, May.
  8. Hartwick, John M., 1990. "Natural resources, national accounting and economic depreciation," Journal of Public Economics, Elsevier, vol. 43(3), pages 291-304, December.
  9. Vincent, Jeffrey R., 1997. "Resource depletion and economic sustainability in Malaysia," Environment and Development Economics, Cambridge University Press, vol. 2(01), pages 19-37, February.
  10. Rubio, M. del Mar, 2004. "The capital gains from trade are not enough: evidence from the environmental accounts of Venezuela and Mexico," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1175-1191, November.
  11. Vincent, Jeffrey R. & Panayotou, Theodore & Hartwick, John M., 1997. "Resource Depletion and Sustainability in Small Open Economies," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 274-286, July.
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