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Modelling Natural Resource Scarcity Using the 'Error-Correction' Approach

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  • B. Moazzami
  • F. J. Anderson

Abstract

An error correction framework is used to test the long-run hypothesis that prices of natural resources commodities in the United States exhibit scarcity properties from the late nineteenth century to 1988 in the sense that real resource commodity prices have been increasing or following a U-shaped pattern, introduced by M. E. Slade (1982). The model is formulated to test the validity of the deflation procedure itself along with the scarcity properties. Results indicate that the model works well as a description of the long-term behavior of resources prices and supports the U-shaped version of the scarcity hypothesis in a majority of cases. An "error correction" framework is used to test the long-run hypothesis that prices of natural resources commodities in the U.S. exhibit scarcity properties from the late nineteenth century to 1988 in the sense that real resource commodity prices have been increasing or following a U-shaped pattern (Slade 1982). The model is formulated to test the validity of the deflation procedure itself along with the scarcity properties. Results indicate that the model works well as a description of the long-term behaviour of resources prices and supports the U-shaped version of the scarcity hypothesis in a majority of cases.

Suggested Citation

  • B. Moazzami & F. J. Anderson, 1994. "Modelling Natural Resource Scarcity Using the 'Error-Correction' Approach," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 801-812, November.
    • Handle: RePEc:cje:issued:v:27:y:1994:i:4:p:801-12
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    Cited by:

    1. Akbar Marvasti & Sami Dakhlia, 2021. "Minimum information management and price‐abundance relationships in a fishery," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(4), pages 491-518, December.
    2. Khalid Kisswani, 2014. "OPEC and political considerations when deciding on oil extraction," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 38(1), pages 96-118, January.
    3. Courage Mlambo, 2022. "Non-Renewable Resources and Sustainable Resource Extraction: An Empirical Test of the Hotelling Rule’s Significance to Gold Extraction in South Africa," Sustainability, MDPI, vol. 14(17), pages 1-17, August.
    4. Prasad, Sanjeev K., 2018. "Business model for transforming a coal mining asset into a rent generating resource: A study under multiple strategic frameworks," Resources Policy, Elsevier, vol. 55(C), pages 163-170.
    5. Vicknair, David & Tansey, Michael & O'Brien, Thomas E., 2022. "Measuring fossil fuel reserves: A simulation and review of the U.S. Securities and Exchange Commission approach," Resources Policy, Elsevier, vol. 79(C).
    6. Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
    7. Jonathan D. Quartey, 2020. "Sustainable Energy Delivery for Africa’s Changing Climate: An Economic Assessment," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(3), pages 214-235, September.
    8. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, September.

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