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Economic growth and property rights on natural resources

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  • Kirill Borissov

    () (European University at St. Petersburg)

  • Mikhail Pakhnin

    (European University at St. Petersburg
    St. Petersburg Institute for Economics and Mathematics (RAS))

Abstract

We consider two models of economic growth with exhaustible natural resources and agents heterogeneous in their time preferences. In the first model, we assume private ownership of natural resources and show that every competitive equilibrium converges to a balanced-growth equilibrium with the long-run rate of growth being determined by the discount factor of the most patient agents. In the second model, natural resources are public property and the resource extraction rate is determined by majority voting. For this model, we define an intertemporal voting equilibrium and prove that it also converges to a balanced-growth equilibrium. In this scenario, the long-run rate of growth is determined by the median discount factor. Our results suggest that if the most patient agents do not constitute a majority of the population, private ownership of natural resources results in a higher rate of growth than public ownership. At the same time, private ownership leads to higher inequality than public ownership, and if inequality impedes growth, then the public property regime is likely to result in a higher long-run rate of growth. However, an appropriate redistributive policy can eliminate the negative impact of inequality on growth.

Suggested Citation

  • Kirill Borissov & Mikhail Pakhnin, 2018. "Economic growth and property rights on natural resources," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 423-482, March.
  • Handle: RePEc:spr:joecth:v:65:y:2018:i:2:d:10.1007_s00199-016-1018-8
    DOI: 10.1007/s00199-016-1018-8
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    1. Should natural resources be publicly owned?
      by noname in ZeeConomics on 2015-04-19 18:34:03

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    1. Kirill Borissov & Mikhail Pakhnin, 2018. "Economic growth and property rights on natural resources," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 423-482, March.
    2. Borissov, Kirill & Pakhnin, Mikhail & Puppe, Clemens, 2017. "On discounting and voting in a simple growth model," European Economic Review, Elsevier, vol. 94(C), pages 185-204.
    3. Borissov, K. & Pakhnin, M., 2018. "A Division of Society into the Rich and the Poor: Some Approaches to Modeling," Journal of the New Economic Association, New Economic Association, vol. 40(4), pages 32-59.

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    More about this item

    Keywords

    Economic growth; Exhaustible resources; Heterogeneous agents; Voting;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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