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Time Scale Externalities and the Management of Renewable Resources

Listed author(s):
  • Giannis Vardas
  • Anastasios Xepapadeas

The evolution of renewable resources is characterized in many cases by different time scales where some state variables such as biomass, may evolve relatively faster than other state variables such as carrying capacity. Ignoring this time scale separation means that a slowly changing variable is treated as constant over time. Management rules designed without accounting for time scale separation will result in inefficiencies in resource management. We call this inefficiency time scale externality and we analyze renewable resource harvesting when carrying capacity evolves slowly, either in response to exogenous forcing or in response to emissions generated by the industrial sector of the economy. We study cooperative and non-cooperative solutions under time scale separation. Using singular perturbation reduction methods (Fenichel 1979), we examine the role of different time scales in environmental management and the potential errors in optimal regulation when time scale separation is ignored.

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File URL: http://wpa.deos.aueb.gr/docs/Time.Scale.Externalities.pdf
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Paper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1501.

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Date of creation: 11 Jan 2015
Handle: RePEc:aue:wpaper:1501
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  1. Grimsrud, Kristine M. & Huffaker, Ray, 2006. "Solving multidimensional bioeconomic problems with singular-perturbation reduction methods: Application to managing pest resistance to pesticidal crops," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 336-353, May.
  2. Levin, Simon & Xepapadeas, Tasos & Crépin, Anne-Sophie & Norberg, Jon & de Zeeuw, Aart & Folke, Carl & Hughes, Terry & Arrow, Kenneth & Barrett, Scott & Daily, Gretchen & Ehrlich, Paul & Kautsky, Nils, 2013. "Social-ecological systems as complex adaptive systems: modeling and policy implications," Environment and Development Economics, Cambridge University Press, vol. 18(02), pages 111-132, April.
  3. Kossioris, G. & Plexousakis, M. & Xepapadeas, A. & de Zeeuw, A., 2011. "On the optimal taxation of common-pool resources," Journal of Economic Dynamics and Control, Elsevier, vol. 35(11), pages 1868-1879.
  4. José-María Da-Rocha & Linda Nøstbakken & Marcos Pérez, 2014. "Pulse Fishing and Stock Uncertainty," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(2), pages 257-274, October.
  5. Crépin, Anne-Sophie & Norberg, Jon & Mäler, Karl-Göran, 2011. "Coupled economic-ecological systems with slow and fast dynamics -- Modelling and analysis method," Ecological Economics, Elsevier, vol. 70(8), pages 1448-1458, June.
  6. Huffaker, Ray & Hotchkiss, Rollin, 2006. "Economic dynamics of reservoir sedimentation management: Optimal control with singularly perturbed equations of motion," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2553-2575, December.
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