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Resources Policy in an Endogenously Growing Economy

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  • Lúdvík Elíasson

Abstract

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.

Suggested Citation

  • Lúdvík Elíasson, 2004. "Resources Policy in an Endogenously Growing Economy," DEGIT Conference Papers c009_034, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c009_034
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    File URL: http://degit.sam.sdu.dk/papers/degit_09/C009_034.pdf
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    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. 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 861-893, November.
    3. Eliasson, Ludvik & Turnovsky, Stephen J., 2004. "Renewable resources in an endogenously growing economy: balanced growth and transitional dynamics," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1018-1049, November.
    4. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
    5. 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.
    6. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, January.
    7. 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.
    8. 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.
    9. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, vol. 35(2-3), pages 650-661, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Endogenous Growth; Renewable Resources; Resource taxation;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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