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The Real Real Price of Nonrenewable Resources: Copper 1870-2000

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Abstract

Over the past 40 years economists have devoted considerable effort to estimating long-run trends in real commodity prices. The results indicate that the real prices for many commodities have fallen, suggesting to the surprise of many that resource scarcity is declining over time. Almost all of this work, however, uses the U.S. producer price index or other standard price deflators, which recent research shows overestimate inflation for several reasons. This article examines copper prices with adjusted deflators designed to eliminate this bias. It finds that the trend over time, which is significantly downward when no adjustment is made to the deflator, displays no tendency in either direction or is significantly upward depending on the magnitude of the deflator adjustment employed. These findings suggest that real resource prices provide less support than widely assumed for the hypothesis that resources are becoming more available or less scarce over time.

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  • Svedberg, Peter & Tilton, John, 2003. "The Real Real Price of Nonrenewable Resources: Copper 1870-2000," Seminar Papers 723, Stockholm University, Institute for International Economic Studies.
  • Handle: RePEc:hhs:iiessp:0723
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    Cited by:

    1. Radetzki, Marian, 2009. "Seven thousand years in the service of humanity--the history of copper, the red metal," Resources Policy, Elsevier, vol. 34(4), pages 176-184, December.
    2. Martin Stürmer, 2013. "150 Years of Boom and Bust: What Drives Mineral Commodity Prices?," 2013 Papers pst529, Job Market Papers.
    3. repec:pal:palcom:v:4:y:2018:i:1:d:10.1057_s41599-017-0060-x is not listed on IDEAS
    4. Svedberg, Peter & Tilton, John E., 2011. "Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis," Resources Policy, Elsevier, vol. 36(1), pages 91-93, March.
    5. Cuddington, John T, 2010. "Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis," Resources Policy, Elsevier, vol. 35(2), pages 72-76, June.
    6. Tilton, John E., 2013. "The terms of trade debate and the policy implications for primary product producers," Resources Policy, Elsevier, vol. 38(2), pages 196-203.
    7. Radetzki, Marian, 2006. "The anatomy of three commodity booms," Resources Policy, Elsevier, vol. 31(1), pages 56-64, March.
    8. Fernandez, Viviana, 2015. "Commodity price excess co-movement from a historical perspective: 1900–2010," Energy Economics, Elsevier, vol. 49(C), pages 698-710.
    9. 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.
    10. MacDonald, Stephen & Meyer, Leslie, 2018. "Long Run Trends and Fluctuations In Cotton Prices," MPRA Paper 84484, University Library of Munich, Germany, revised 10 Feb 2018.
    11. López, Ramón & Miller, Sebastian J., 2008. "Chile: The Unbearable Burden of Inequality," World Development, Elsevier, vol. 36(12), pages 2679-2695, December.
    12. Fernandez, Viviana, 2014. "Linear and non-linear causality between price indices and commodity prices," Resources Policy, Elsevier, vol. 41(C), pages 40-51.
    13. Kushnir, Duncan & Sandén, Björn A., 2012. "The time dimension and lithium resource constraints for electric vehicles," Resources Policy, Elsevier, vol. 37(1), pages 93-103.
    14. Fernandez, Viviana, 2012. "Trends in real commodity prices: How real is real?," Resources Policy, Elsevier, vol. 37(1), pages 30-47.
    15. Sanidas, Elias, 2014. "Four harmonic cycles explain and predict commodity currencies' wide long term fluctuations," Technological Forecasting and Social Change, Elsevier, vol. 87(C), pages 135-151.

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    Keywords

    resources; copper; real price; inflation bias; scarcity;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • F10 - International Economics - - Trade - - - General
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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