Specialization and non-renewable resources: Ricardo meets Ricardo

    Authors

    U. Chakravorty; D. Krulce;J. Roumasset

    Comments

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    Abbreviated Journal Title

    J. Econ. Dyn. Control

    Keywords

    comparative advantage; dynamic models; energy resources; heterogenous; demand; hotelling theory; EXHAUSTIBLE RESOURCES; EXTRACTION; ECONOMICS; ORDER; COST; Economics

    Abstract

    The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects. (c) 2004 Elsevier B.V. All rights reserved.

    Journal Title

    Journal of Economic Dynamics & Control

    Volume

    29

    Issue/Number

    9

    Publication Date

    1-1-2005

    Document Type

    Article

    Language

    English

    First Page

    1517

    Last Page

    1545

    WOS Identifier

    WOS:000231520100003

    ISSN

    0165-1889

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