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

  • José Ramón Ruiz Tamarit

    (Universitat de València)

  • Manuel Sánchez Moreno

    (Universitat de València)

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.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-21.pdf
File Function: Fisrt version / Primera version, 2006
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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2006-21.

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Length: 36 pages
Date of creation: Nov 2006
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2006-21
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