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Resource Depletion and Trade: Adding a Nonrenewable Resource to the Heckscher-Ohlin Model

Author

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  • Henry Thompson

Abstract

This paper develops the intertemporal equilibrium of a small open economy with a nonrenewable resource intensive export and a labor intensive import. Optimal depletion implies the resource price rises at the rate of the capital return. Capital grows with investment and labor at a steady rate, raising the issue of whether depletion necessarily diminishes. Effects of a depletion tax, import tariff, and export subsidy are examined. Simulations with Cobb-Douglas production functions illustrate model properties. The paper also considers a constant depletion rate, tragedy of the commons, and myopic resource owner.

Suggested Citation

  • Henry Thompson, 2013. "Resource Depletion and Trade: Adding a Nonrenewable Resource to the Heckscher-Ohlin Model," Auburn Economics Working Paper Series auwp2013-13, Department of Economics, Auburn University.
  • Handle: RePEc:abn:wpaper:auwp2013-13
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    File URL: http://cla.auburn.edu/econwp/Archives/2013/2013-13.pdf
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    More about this item

    Keywords

    Resource Depletion; Trade; General Equilibrium;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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