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Does productive capital affect the order of resource exploitation?

  • Favard, Pascal

The purpose of this paper is to show that in a general equilibrium framework it is not always optimal to exploit resources in strict sequence, beginning with the lowest cost deposit, even if it is possible to accumulate productive capital. Indeed if there is an exogenous upper bound on the flow of the substitute, it is always optimal to consume it simultaneously with a lower cost stock. Moreover, it may be optimal to consume the high-cost substitute before using a lower cost resource. Classification-JEL: Q3

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File URL: http://www.sciencedirect.com/science/article/B6V85-44KV265-2/2/ee4f6eb9c6a54c8b77b86207b554f02f
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 26 (2002)
Issue (Month): 6 (June)
Pages: 911-918

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Handle: RePEc:eee:dyncon:v:26:y:2002:i:6:p:911-918
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
  2. Kemp, Murray C & Long, Ngo Van, 1980. "On Two Folk Theorems Concerning the Extraction of Exhaustible Resources," Econometrica, Econometric Society, vol. 48(3), pages 663-73, April.
  3. Lewis, Tracy R, 1982. "Sufficient Conditions for Extracting Least Cost Resource First," Econometrica, Econometric Society, vol. 50(4), pages 1081-83, July.
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