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Exogenous Productivity Shocks and Capital Investment in Common-pool Resources

  • Fissel, Benjamin E
  • Glibert, Ben
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    We model exogenous technology shocks in common-pool industries using a compound Poisson process for total factor productivity. Rapid di�usion of exogenous innovations is typical in the commons, but technology is rarely modeled this way. Technology shocks lower the equilibrium resource stock while causing capital buildup based on transitory pro�ts with myopic expectations. The steady state changes from a stable node to a shifting focus with boom and bust cycles, even if only technology is uncertain. A �sheries application is developed, but the results apply to many settings with discontinuous changes in value and open access with costly exit.

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    Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt1qp1g9ts.

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    Date of creation: 23 Sep 2010
    Date of revision:
    Handle: RePEc:cdl:ucsdec:qt1qp1g9ts
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    1. Daniel R. Siegel, 1985. "Estimating Potential Social Losses from Market Failure: Oil Exploration in Alberta," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 537-552, Winter.
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    3. Homans, Frances R. & Wilen, James E., 1997. "A Model of Regulated Open Access Resource Use," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 1-21, January.
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    5. Baltagi, Badi H & Griffin, James M, 1988. "A General Index of Technical Change," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 20-41, February.
    6. Dale Squires, 1992. "Productivity Measurement in Common Property Resource Industries: An Application to the Pacific Coast Trawl Fishery," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 221-236, Summer.
    7. Kerry Smith, V., 1972. "The implications of common property resources for technical change," European Economic Review, Elsevier, vol. 3(4), pages 469-479, December.
    8. Sennewald, Ken & Wälde, Klaus, 2005. ""Ito's Lemma" and the Bellman equation for Poisson processes: An applied view," W.E.P. - Würzburg Economic Papers 58, University of Würzburg, Chair for Monetary Policy and International Economics.
    9. Hannesson, Rognvaldur, 2007. "Growth accounting in a fishery," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 364-376, May.
    10. Pankaj Tandon, 1983. "Rivalry and the Excessive Allocation of Resources to Research," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 152-165, Spring.
    11. Dale Squires & Niels Vestergaard, 2013. "Technical Change and The Commons," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1769-1787, December.
    12. Clark, Colin W & Clarke, Frank H & Munro, Gordon R, 1979. "The Optimal Exploitation of Renewable Resource Stocks: Problems of Irreversible Investment," Econometrica, Econometric Society, vol. 47(1), pages 25-47, January.
    13. Kenneth Hendricks & Dan Kovenock, 1989. "Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 164-182, Summer.
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