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The Optimal Use of Exhaustible Resources Under Non-constant Returns to Scale

Author

Listed:
  • Sergey Aseev
  • Konstantin Besov
  • Serguei Kaniovski

Abstract

The paper offers a complete analysis of the welfare-maximising capital investment and resource depletion policies in the Dasgupta-Heal-Solow-Stiglitz (DHSS) model with capital depreciation and any returns to scale. We establish a general existence result and show that an optimal admissible policy may not exist if the output elasticity of the resource equals 1. We characterise the optimal policies by applying an appropriate version of the Pontryagin maximum principle for infinite-horizon optimal control problems. We conclude the paper with an economic interpretation and a discussion of the welfare-maximising policies.

Suggested Citation

  • Sergey Aseev & Konstantin Besov & Serguei Kaniovski, 2016. "The Optimal Use of Exhaustible Resources Under Non-constant Returns to Scale," WIFO Working Papers 525, WIFO.
  • Handle: RePEc:wfo:wpaper:y:2016:i:525
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    References listed on IDEAS

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    3. Laitner, John & Stolyarov, Dmitriy, 2004. "Aggregate returns to scale and embodied technical change: theory and measurement using stock market data," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 191-233, January.
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    Keywords

    optimal growth; non-constant returns to scale; exhaustible resources;

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