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Optimal Regulation And Growth In A Natural-Resource-Based Economy

Author

Listed:
  • José Ramón Ruiz Tamarit

    (Universitat de València)

  • Manuel Sánchez Moreno

    (Universitat de València)

Abstract

This paper develops a two-sector model for a renewable natural resource based economy. Pareto efficient results show the optimal harvesting rate that allows for sustained long-run optimal growth, which is upper-bounded by the biological rate of reproduction. Regulation prevents from resource over-exploitation and exhaustion which arise under open access. The Ramsey policy allowing the competitive economy to reach the first-best solution, leads the government to tax harvesting activity from firms and distribute the receipts among households. In the short-run the tax is variable. In the long-run, the lower the intrinsic rate of reproduction the higher the constant unit tax on the resource use.

Suggested Citation

  • José Ramón Ruiz Tamarit & Manuel Sánchez Moreno, 2006. "Optimal Regulation And Growth In A Natural-Resource-Based Economy," Working Papers. Serie AD 2006-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasad:2006-21
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-21.pdf
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    References listed on IDEAS

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    Cited by:

    1. Voosholz, Frauke, 2014. "The influence of different production functions on modeling resource extraction and economic growth," CAWM Discussion Papers 72, University of Münster, Center of Applied Economic Research Münster (CAWM).

    More about this item

    Keywords

    Natural Resources; Efficiency; Open Access; Ramsey Regulation; Growth.;

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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