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Resources Policy in an Endogenously Growing Economy

  • Lúdvík Elíasson
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    In a decentralized open economy model with an endogenous growth sector and a renewable resource sector a steady state–balanced growth equilibrium will at best be attained by chance. An interior equilibrium where both sectors exist and the resource sector is in equilibrium while the other sector grows can be achieved by the help of government policy. The optimum equilibrium is unstable in the decentralized economy and active government policy is needed to enforce it. Apparently contradicting policies may be needed to first move the economy to the optimal equilibrium and then to keep it there. In the current model the resource good is exported in exchange for a foreign consumption good. Hence a tariff on imports will have the same qualitative effects as a harvest fee.

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    File URL: http://degit.sam.sdu.dk/papers/degit_09/C009_034.pdf
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    Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_034.

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    Length: 21 pages
    Date of creation: Jun 2004
    Date of revision:
    Handle: RePEc:deg:conpap:c009_034
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    1. Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-93, November.
    2. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    3. Lúdvík Elíasson & Stephen J. Turnovsky, 2002. "Renewable Resources In An Endogenously Growing Economy: Balanced Growth And Transitional Dynamics," Economics wp20_ludvik, Department of Economics, Central bank of Iceland.
    4. Li, Chuan-Zhong & Lofgren, Karl-Gustaf, 2000. "Renewable Resources and Economic Sustainability: A Dynamic Analysis with Heterogeneous Time Preferences," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 236-250, November.
    5. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, vol. 35(2-3), pages 650-661, April.
    6. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
    7. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, June.
    8. Rodriguez, Francisco & Sachs, Jeffrey D, 1999. " Why Do Resource-Abundant Economies Grow More Slowly?," Journal of Economic Growth, Springer, vol. 4(3), pages 277-303, September.
    9. Solow, Robert M., 1999. "Neoclassical growth theory," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 9, pages 637-667 Elsevier.
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