Property rights and the dynamics of renewable resources in North-South trade, Chapter 1
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.
|Date of creation:||1994|
|Date of revision:|
|Publication status:||Published in Trade, Innovation, Environment (1994): pp. 15-54|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
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- Chichilnisky,Graciela & Heal,Geoffrey M., 2005.
"The Evolving International Economy,"
Cambridge University Press, number 9780521310017, November.
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- Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
- 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.
- Maler, Karl-Goran, 1990. "International Environmental Problems," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 80-108, Spring.
- Chichilnisky, Graciela, 1985. "International trade in resources: a general equilibrium analysis," MPRA Paper 8356, University Library of Munich, Germany.
- Dasgupta, Partha, 1990. "The Environment as a Commodity," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 51-67, Spring.
- Chichilnisky, Graciela, 1986. "A general equilibrium theory of North-South trade," MPRA Paper 8810, University Library of Munich, Germany.
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