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Property rights and the dynamics of renewable resources in North-South trade, Chapter 1

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  • Chichilnisky, Graciela

Abstract

To explain the patterns of world trade of resources, this paper combines the biological dynamics of the renewable resource and game theoretical explanations of its extraction under different property regimes, with a general equilibrium model of North South trade (Chichilnisky, 1981, 1986). The two regions produce, consume and trade two goods using two inputs, a renewable resource E and capital. To expose the importance of property rights in explaining trade, the two regions are taken as identical except for the property rights regimes on the pool from which the resource is extracted: the South has common property and the North private property. The paper formulates the Nash equilibrium of a game which explains the harvesting of the resource under different property rights regimes: more is supplied at each price under unregulated property rights than it is with private property (Lemma 1). Theorem 1 proves that the difference in property rights by itself explains trade between otherwise identical regions: the South exports the environmentally intensive product even though it has no comparative advantage and the North the capital intensive products. The North overconsumes the resource intensive products which it imports at prices which are below social costs. This occurs even though in equilibrium the prices of all goods and all factors of production are equal across the world. Resources are overextracted and the world pattern of consumption and trade of resources is Pareto inefficient. Several policies which could redress the inefficiency, particularly recent property rights policies towards biodiversity and land ownership in the Americas, are discussed in this paper.

Suggested Citation

  • Chichilnisky, Graciela, 1994. "Property rights and the dynamics of renewable resources in North-South trade, Chapter 1," MPRA Paper 8513, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:8513
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    File URL: https://mpra.ub.uni-muenchen.de/8513/1/MPRA_paper_8513.pdf
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    References listed on IDEAS

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    1. Dasgupta, P., 1990. "The Environment as Commodity.i," Research Paper 84, World Institute for Development Economics Research.
    2. Chichilnisky,Graciela & Heal,Geoffrey M., 2005. "The Evolving International Economy," Cambridge Books, Cambridge University Press, number 9780521310017, January.
    3. Chichilnisky, Graciela & Heal, Geoffrey, 1983. "Community preferences and social choice," Journal of Mathematical Economics, Elsevier, vol. 12(1), pages 33-61, September.
    4. Graciela Chichilnisky, 1990. "On The Mathematical Foundations Of Political Economy," Contributions to Political Economy, Oxford University Press, vol. 9(1), pages 25-41.
    5. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, Oxford University Press, vol. 88(2), pages 312-319.
    6. Chichilnisky, Graciela, 1985. "International trade in resources: a general equilibrium analysis," MPRA Paper 8356, University Library of Munich, Germany.
    7. Barbier, E B & Burgess, J C, 2001. " The Economics of Tropical Deforestation," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 413-433, July.
    8. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    9. Chichilnisky, Graciela, 1981. "Terms of trade and domestic distribution : Export-led growth with abundant labour," Journal of Development Economics, Elsevier, vol. 8(2), pages 163-192, April.
    10. Maler, Karl-Goran, 1990. "International Environmental Problems," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 80-108, Spring.
    11. Chichilnisky, Graciela, 1986. "A general equilibrium theory of North-South trade," MPRA Paper 8810, University Library of Munich, Germany.
    12. Dasgupta, Partha, 1990. "The Environment as a Commodity," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 51-67, Spring.
    13. Tobey, James A, 1990. "The Effects of Domestic Environmental Policies on Patterns of World Trade: An Empirical Test," Kyklos, Wiley Blackwell, vol. 43(2), pages 191-209.
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    Cited by:

    1. Costantini, Valeria & Mazzanti, Massimiliano, 2012. "On the green and innovative side of trade competitiveness? The impact of environmental policies and innovation on EU exports," Research Policy, Elsevier, vol. 41(1), pages 132-153.
    2. Anders Sørensen & Tryggvi Herbertsson, 1998. "Policy Rules for Exploitation of Renewable Resources: A Macroeconomic Perspective," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 12(1), pages 53-76, July.

    More about this item

    Keywords

    international trade; natural resources; finite resources; north-south trade; property rights; market inefficiency; policy;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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