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Extracting spatial resources under possible regime shift

Listed author(s):
  • Christopher Costello
  • Bruno Nkuiya
  • Nicolas Querou

How will countries harvesting mobile renewable resource react to the threat of climate change? We address the non-cooperative exploitation of a migratory renewable resource in the presence of possible regime shift that affects its movement. Motivated by the anticipated effects of climate change, we model a regime shift that will alter the spatial movement patterns of the resource at some point in the future. We develop a stochastic spatial bioeconomic model to address the effects of this class of regime shift on non-cooperative harvest decisions made by decentralized owners such as countries exploiting a migratory fish or other natural resource stock. We find that the threat of a future shift modifies the standard golden rule and may induce more aggressive harvest everywhere, irrespective of whether the owner will be advantaged or disadvantaged by the shift. We also identify conditions under which the threat of regime shift induces owners to reduce harvest rates in advance of the shift. Our analysis suggests that different property rights structures (single ownership vs common property) or heterogenous growth can give rise to previously unexplored incentives and can even reverse conventional wisdom about how countries will react to the threat of environmental change.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2017-07.pdf
File Function: First version, 08-2017
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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 17-07.

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Length: 35 pages + Appendix
Date of creation: Aug 2017
Handle: RePEc:lam:wpaper:17-07
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Web page: http://www.lameta.univ-montp1.fr/

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  1. Polasky, Stephen & de Zeeuw, Aart & Wagener, Florian, 2011. "Optimal management with potential regime shifts," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 229-240, September.
  2. Costello, Christopher & Quérou, Nicolas & Tomini, Agnes, 2015. "Partial enclosure of the commons," Journal of Public Economics, Elsevier, vol. 121(C), pages 69-78.
  3. Ren, Bijie & Polasky, Stephen, 2014. "The optimal management of renewable resources under the risk of potential regime shift," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 195-212.
  4. Miller, Steve & Nkuiya, Bruno, 2016. "Coalition formation in fisheries with potential regime shift," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 189-207.
  5. Robert N. Stavins, 2011. "The Problem of the Commons: Still Unsettled after 100 Years," American Economic Review, American Economic Association, vol. 101(1), pages 81-108, February.
  6. Ulph, Alistair & Ulph, David, 1997. "Global Warming, Irreversibility and Learning," Economic Journal, Royal Economic Society, vol. 107(442), pages 636-650, May.
  7. Calvin Atewamba & Bruno Nkuiya, 2017. "Testing the Assumptions and Predictions of the Hotelling Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 66(1), pages 169-203, January.
  8. Eli Fenichel & Timothy Richards & David Shanafelt, 2014. "The Control of Invasive Species on Private Property with Neighbor-to-Neighbor Spillovers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(2), pages 231-255, October.
  9. Ute Kapaun & Martin Quaas, 2013. "Does the Optimal Size of a Fish Stock Increase with Environmental Uncertainties?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 293-310, February.
  10. May Elsayyad & Florian Morath, 2016. "Technology Transfers For Climate Change," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 1057-1084, 08.
  11. Reed, William J., 1979. "Optimal escapement levels in stochastic and deterministic harvesting models," Journal of Environmental Economics and Management, Elsevier, vol. 6(4), pages 350-363, December.
  12. Kaffine Daniel T & Costello Christopher, 2011. "Unitization of Spatially Connected Renewable Resources," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-31, March.
  13. Bård Harstad, 2016. "The Dynamics Of Climate Agreements," Journal of the European Economic Association, European Economic Association, vol. 14(3), pages 719-752, June.
  14. Diekert, Florian K., 2017. "Threatening thresholds? The effect of disastrous regime shifts on the non-cooperative use of environmental goods and services," Journal of Public Economics, Elsevier, vol. 147(C), pages 30-49.
  15. Fesselmeyer, Eric & Santugini, Marc, 2013. "Strategic exploitation of a common resource under environmental risk," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 125-136.
  16. Christopher Costello & Stephen Polasky & Andrew Solow, 2001. "Renewable resource management with environmental prediction," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 196-211, February.
  17. Chris J. Kennedy & Edward B. Barbier, 2013. "Renewable resource management with environmental prediction: the importance of structural specification," Canadian Journal of Economics, Canadian Economics Association, vol. 46(3), pages 1110-1122, August.
  18. Costello, Christopher & Polasky, Stephen, 2008. "Optimal harvesting of stochastic spatial resources," Journal of Environmental Economics and Management, Elsevier, vol. 56(1), pages 1-18, July.
  19. William Nordhaus, 2015. "Climate Clubs: Overcoming Free-Riding in International Climate Policy," American Economic Review, American Economic Association, vol. 105(4), pages 1339-1370, April.
  20. Sakamoto, Hiroaki, 2014. "Dynamic resource management under the risk of regime shifts," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 1-19.
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