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A Test of the Hotelling Rule Using Old-Growth Timber Data

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  • Livernois, J.
  • Thille, H.
  • Zhang, X.

Abstract

. The paper tests Hotelling's prediction that scarcity rent for a non‐renewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old‐growth timber, a resource that is effectively non‐renewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling rule that we derive is not rejected in several of our specifications. Un test de la règle d’Hotelling à l’aide de données pour du bois en provenance de forêts anciennes. Ce mémoire met au test la prédiction d’Hotelling à savoir que la rente de rareté pour une ressource non renouvelable va croître au rythme du taux d’escompte dans un équilibre de marché. On fait ce test à l’aide de données pour le bois en provenance de forêts anciennes, une ressource qui est à toutes fins utiles non renouvelable. Contrairement à ce que suggèrent certaines études antérieures, une mesure de la rente de rareté est directement observable dans la valeur marchande du bois sur pied qui émerge des enchères de bois. On construit un modèle qui ouvre à la possibilité de reforestation et s’arrime au cadre institutionnel du marché du bois dans l’ouest des Etats‐Unis. La règle modifiée d’Hotelling que les auteurs dérivent n’est pas rejetée dans plusieurs des spécifications du modèle
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Suggested Citation

  • Livernois, J. & Thille, H. & Zhang, X., 2003. "A Test of the Hotelling Rule Using Old-Growth Timber Data," Working Papers 2003-4, University of Guelph, Department of Economics and Finance.
  • Handle: RePEc:gue:guelph:2003-4
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    Cited by:

    1. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, September.
    2. Ian Keay, 2010. "The Impact Of Commodity Price Volatility On Resource Intensive Economies," Working Paper 1274, Economics Department, Queen's University.
    3. Abhijit Sharma & Kelvin G Balcombe & Iain M Fraser, 2009. "Non-renewable resource prices: Structural breaks and long term trends," Economics Bulletin, AccessEcon, vol. 29(2), pages 805-819.
    4. Lisa Leinert, 2012. "Does the Oil Price Adjust Optimally to Oil Field Discoveries?," CER-ETH Economics working paper series 12/169, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    5. Brian R. Copeland & M. Scott Taylor, 2017. "Environmental and resource economics: A Canadian retrospective," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1381-1413, December.
    6. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    7. Orlov, Anton, 2016. "Effects of higher domestic gas prices in Russia on the European gas market: A game theoretical Hotelling model," Applied Energy, Elsevier, vol. 164(C), pages 188-199.
    8. Caputo, Michael R., 2011. "A nearly complete test of a capital accumulating, vertically integrated, nonrenewable resource extracting theory of a competitive firm," Resource and Energy Economics, Elsevier, vol. 33(3), pages 725-744, September.
    9. Gregor Schwerhoff & Ottmar Edenhofer & Marc Fleurbaey, 2020. "Taxation Of Economic Rents," Journal of Economic Surveys, Wiley Blackwell, vol. 34(2), pages 398-423, April.
    10. Ludwig, Markus, 2012. "The Visible Hand: National Oil Companies, Oil Supply and the Ermergence of the Hotelling Rent," Working papers 2012/11, Faculty of Business and Economics - University of Basel.
    11. Ian Keay, 2007. "Resource Rents and their Impact on Institutional and Economic Development," Working Paper 1143, Economics Department, Queen's University.

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