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Physical versus economic depletion of a nonrenewable natural resource

Author

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  • Rodríguez, Xosé A.
  • Arias, Carlos
  • Rodríguez-González, Ana

Abstract

The present paper explores the relationship between physical and economic depletion of a nonrenewable natural resource using a decomposition of mining costs akin to the one used in the literature on productivity and technical change. We argue that this decomposition can provide key insights on future availability of nonrenewable natural resources. Using data on slate mining in Galicia Northern Spain), we provide quantitative evidence of the role played by physical depletion in economic exhaustion but also of the offsetting effects of technical change. Additionally, we provide a measure of the effects on economic depletion of input prices, output, fixed inputs and production scale. Input prices and fixed input misallocation contributes far more to economic depletion than physical depletion while technical change has a remarkable negative contribution to economic depletion. Policy implications are discussed, particularly, the importance of promoting technical change.

Suggested Citation

  • Rodríguez, Xosé A. & Arias, Carlos & Rodríguez-González, Ana, 2015. "Physical versus economic depletion of a nonrenewable natural resource," Efficiency Series Papers 2015/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
  • Handle: RePEc:oeg:wpaper:2015/01
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    File URL: https://www.unioviedo.es/oeg/ESP/esp_2015_01.pdf
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    References listed on IDEAS

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    1. Epple, Dennis & Londregan, John, 1993. "Strategies for modeling exhaustible resource," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 22, pages 1077-1107, Elsevier.
    2. Tilton, John E. & Lagos, Gustavo, 2007. "Assessing the long-run availability of copper," Resources Policy, Elsevier, vol. 32(1-2), pages 19-23.
    3. Rodriguez, Xose Anton & Arias, Carlos, 2008. "The effects of resource depletion on coal mining productivity," Energy Economics, Elsevier, vol. 30(2), pages 397-408, March.
    4. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
    5. John T. Cuddington & Diana L. Moss, 2001. "Technological Change, Depletion, and the U.S. Petroleum Industry," American Economic Review, American Economic Association, vol. 91(4), pages 1135-1148, September.
    6. Morrison, Catherine J & Schwartz, Amy Ellen, 1996. "State Infrastructure and Productive Performance," American Economic Review, American Economic Association, vol. 86(5), pages 1095-1111, December.
    7. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
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    Cited by:

    1. Villena, Marcelo & Greve, Fernando, 2018. "On resource depletion and productivity: The case of the Chilean copper industry," Resources Policy, Elsevier, vol. 59(C), pages 553-562.

    More about this item

    Keywords

    Non-renewable natural resources; Physical depletion; Economic depletion; Mining cost; Slate mining; Technical change; Total Cost Growth decomposition;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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