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Public versus Private Ownership of Exhaustible Resources in Models of Economic Growth with Heterogeneous Consumers

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  • Kirill Borissov
  • Alexander Surkov

Abstract

We develop two models of economic growth with exhaustible natural resources, exogenous technical progress and consumers heterogeneous in time preferences. The first model assumes private ownership of natural resources. In the second model, natural resources are public property and the resource extraction rate is chosen by voting. We show that the long-run rate of growth is determined by the discount factor of the most patient consumer in the case of private property and by the median discount factor in the case of public property. It follows that if the discount factors of consumers are given exogenously, the long-run rate of growth under the private property regime is higher than or equal to that under the public property regime. However, if high income inequality decreases effective discount factors of consumers, then public property can result in a higher rate of growth than private property.

Suggested Citation

  • Kirill Borissov & Alexander Surkov, 2012. "Public versus Private Ownership of Exhaustible Resources in Models of Economic Growth with Heterogeneous Consumers," DEGIT Conference Papers c017_046, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c017_046
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    References listed on IDEAS

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    More about this item

    Keywords

    economic growth; exhaustible resources; heterogeneous agents; voting;

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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