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


  • Henry Thompson


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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    References listed on IDEAS

    1. Ruffin, Roy J, 1969. "Tariffs, Intermediate Goods, and Domestic Protection," American Economic Review, American Economic Association, vol. 59(3), pages 261-269, June.
    2. Lloyd A. Metzler, 1949. "Tariffs, International Demand, and Domestic Prices," Journal of Political Economy, University of Chicago Press, vol. 57, pages 345-345.
    3. Ferguson, D. G., 1978. "International capital mobility and comparative advantage : The two-country, two-factor case," Journal of International Economics, Elsevier, vol. 8(3), pages 373-396, August.
    4. Svensson, Lars E.O., 1984. "Factor trade and goods trade," Journal of International Economics, Elsevier, vol. 16(3-4), pages 365-378, May.
    5. Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
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    More about this item


    Resource Depletion; Trade; General Equilibrium;

    JEL classification:

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

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