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On maximin value and policy functions in an exhaustible resource model

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  • Tapan Mitra

Abstract

type="main" xml:lang="en"> This paper studies maximin paths in the context of a standard exhaustible resource model. Under the assumption that the resource is important in production, it establishes the efficiency and uniqueness of non-trivial maximin paths. It uses these results to study the nature of the maximin value and policy functions. The value function is shown to be differentiable with respect to the initial resource stock, and the derivative of the value function is related to the shadow prices associated with the maximin path starting from that resource stock. We show how maximin policy functions can be derived, using the maximin value function, and the fact that the maximin path always follows Hartwick's investment rule.

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  • Tapan Mitra, 2015. "On maximin value and policy functions in an exhaustible resource model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(1), pages 39-58, March.
    • Handle: RePEc:bla:ijethy:v:11:y:2015:i:1:p:39-58
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    Cited by:

    1. Antony, Jürgen & Klarl, Torben, 2019. "Resource depletion in a Ramsey economy with subsistence consumption, exogenous technical change and capital depreciation: A full characterization," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203640, Verein für Socialpolitik / German Economic Association.
    2. Yu, Yun & Lei, Yalin, 2017. "China's provincial exhaustible resources rent and produced capital stock—Based on Hartwick's rule," Resources Policy, Elsevier, vol. 52(C), pages 114-121.
    3. Antony, Jürgen & Klarl, Torben, 2023. "Subsistence consumption and natural resource depletion: Can resource-rich low-income countries realize sustainable consumption paths?," Journal of Macroeconomics, Elsevier, vol. 77(C).

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