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Relative consumption and renewable resource extraction under alternative property-rights regimes

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  • Alvarez-Cuadrado, Francisco
  • Van Long, Ngo

Abstract

This paper presents a simple model of resource extraction where preferences are defined over the individual’s consumption level, her effort and the comparison of her consumption with that of other members of the community. Our specification captures the intuition that lies behind the growing body of empirical evidence that places interpersonal comparisons as a key determinant of well-being. We consider the effect of consumption externalities under two alternative property-rights regimes: perfect property rights and open access. We identify two dimensions along which consumption externalities distort the efficient exploitation of resources, or, in the case of open access, aggravate the over-exploitation of resources: (i) the static trade-off between consumption and leisure, and (ii) the dynamic trade-off between current and future consumption. In general, envious agents over-exploit the natural resource stock, resulting in a steady-state stock lower than the efficient level chosen by a central planner. We propose a tax mechanism to induce the first-best outcome.

Suggested Citation

  • Alvarez-Cuadrado, Francisco & Van Long, Ngo, 2011. "Relative consumption and renewable resource extraction under alternative property-rights regimes," Resource and Energy Economics, Elsevier, vol. 33(4), pages 1028-1053.
  • Handle: RePEc:eee:resene:v:33:y:2011:i:4:p:1028-1053
    DOI: 10.1016/j.reseneeco.2010.09.003
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    Citations

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    Cited by:

    1. Benchekroun, Hassan & Long, Ngo Van, 2016. "Status concern and the exploitation of common pool renewable resources," Ecological Economics, Elsevier, vol. 125(C), pages 70-82.
    2. Ronald Wendner, 2014. "Ramsey, Pigou, Heterogeneous Agents, and Nonatmospheric Consumption Externalities," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(3), pages 491-521, June.
    3. Wei-Bin Zhang, 2015. "Oscillations in a Growth Model with Endogenous Wealth, Resource, Housing, and Elastic Labour Supply," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(9), pages 458-472, September.
    4. Zhang Wei-Bin, 2011. "Economic Growth And Dynamics Of Renewable Resource With Housing, Agricultural And Resource Land Use," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 6(2), pages 151-174, August.
    5. Pu-yan Nie & Peng Sun & Bill Z. Yang, 2014. "A Dynamic Study on Ecological Disaster, Government Regulation, and Renewable Resources," American Journal of Economics and Sociology, Wiley Blackwell, vol. 73(2), pages 410-442, April.
    6. Eckerstorfer, Paul & Wendner, Ronald, 2013. "Asymmetric and non-atmospheric consumption externalities, and efficient consumption taxation," Journal of Public Economics, Elsevier, vol. 106(C), pages 42-56.
    7. Francisco Alvarez-Cuadrado & Jose Maria Casado & Jose Maria Labeaga, 2016. "Envy and Habits: Panel Data Estimates of Interdependent Preferences," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(4), pages 443-469, August.
    8. repec:now:jnlsbe:102.00000065t is not listed on IDEAS
    9. Ngo Van Long & Fabien Prieur & Klarizze Puzon & Mabel Tidball, 2013. "Markov Perfect Equilibria in Differential Games with Regime Switching Strategies," Working Papers 13-06, LAMETA, Universtiy of Montpellier, revised Jan 2014.
    10. Van Long, Ngo, 2016. "The Impacts of Other-Regarding Preferences and Ethical Choice on Environmental Outcomes: A Review of the Literature," Strategic Behavior and the Environment, now publishers, vol. 6(1-2), pages 1-35, December.
    11. Wei-Bin ZHANG, 2014. "Human Capital, Wealth, and Renewable Resources," Expert Journal of Economics, Sprint Investify, vol. 2(1), pages 1-20.

    More about this item

    Keywords

    Consumption externalities; Status seeking; Renewable resources;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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