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

  • Kirill Borissov
  • Alexander Surkov

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.

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File URL: http://degit.sam.sdu.dk/papers/degit_17/C017_046.pdf
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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c017_046.

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Length: 22 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:deg:conpap:c017_046
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  1. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
  2. BORISSOV, Kirill & LAMBRECHT, Stéphane, . "Growth and distribution in an AK-model with endogenous impatience," CORE Discussion Papers RP 2134, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Chermak, Janie M. & Patrick, Robert H., 2002. "Comparing tests of the theory of exhaustible resources," Resource and Energy Economics, Elsevier, vol. 24(4), pages 301-325, November.
  4. Andrei Shleifer, 1998. "State Versus Private Ownership," Harvard Institute of Economic Research Working Papers 1841, Harvard - Institute of Economic Research.
  5. Robert T. Deacon & Henning Bohn, 2000. "Ownership Risk, Investment, and the Use of Natural Resources," American Economic Review, American Economic Association, vol. 90(3), pages 526-549, June.
  6. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39, pages 137.
  7. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  8. Antonio Rangel, 2003. "Forward and Backward Intergenerational Goods: Why Is Social Security Good for the Environment?," American Economic Review, American Economic Association, vol. 93(3), pages 813-834, June.
  9. Alberto Chong & Florencio López-de-Silanes, 2005. "Privatization in Latin America : Myths and Reality," World Bank Publications, The World Bank, number 7461, June.
    • Florencio López-de-Silanes & Pablo Serra & Paul Gertler & Ernesto Schargrodsky & Francisco Anuatti & Sebastián Galiani & Alberto E. Chong & Carlos Pombo & Federico Sturzenegger & Máximo Torero & Carlo, 2005. "Privatization in Latin America: Myths and Reality," IDB Publications (Books), Inter-American Development Bank, number 59618 edited by Florencio López-de-Silanes & Alberto E. Chong.
  10. James A. Schmitz & Arilton Teixeira, 2004. "Privatization's impact on private productivity: the case of Brazilian iron ore," Staff Report 337, Federal Reserve Bank of Minneapolis.
  11. repec:idb:brikps:59618 is not listed on IDEAS
  12. Rafael La Porta & Florencio Lopez-de-Silane, 1997. "The Benefits of Privatization: Evidence from Mexico," NBER Working Papers 6215, National Bureau of Economic Research, Inc.
  13. B. D. Bernheim & S. N. Slavov, 2009. "A Solution Concept for Majority Rule in Dynamic Settings," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 33-62.
  14. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  15. Long, Ngo Van, 1975. "Resource extraction under the uncertainty about possible nationalization," Journal of Economic Theory, Elsevier, vol. 10(1), pages 42-53, February.
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