A nearly complete test of a capital accumulating, vertically integrated, nonrenewable resource extracting theory of a competitive firm

    Authors

    M. R. Caputo

    Comments

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    Abbreviated Journal Title

    Resour. Energy Econ.

    Keywords

    Nonrenewable resource economics; Optimal control; Shadow prices; Testable implications; EXHAUSTIBLE RESOURCES; COMPARATIVE DYNAMICS; HOTELLING MODEL; ECONOMICS; SCARCITY; BEHAVIOR; COST; RULE; Economics; Energy & Fuels; Environmental Sciences; Environmental Studies

    Abstract

    A new approach to testing a generalized Hotelling theory of a nonrenewable resource extracting firm is developed. In contrast to approaches extant, it (i) permits empirical testing of all the refutable implications of the theory, (ii) does not require estimates of, or data on, the shadow value of the resource stock, (iii) does not require estimation of the feedback control functions or the necessary conditions associated with the underlying optimal control problem, and (iv) treats the capital stock in a theoretically sound manner in the econometric model. Because of certain limitations in the data, most, but not all, of the refutable implications of the theory are tested using a Bayesian approach. Other limitations in the data mean that the paper is better viewed as an illustration of how one would go about rigorously testing the extended Hotelling theory, rather than as one which presents convincing empirical evidence that supports or refutes it. (C) 2011 Elsevier B.V. All rights reserved.

    Journal Title

    Resource and Energy Economics

    Volume

    33

    Issue/Number

    3

    Publication Date

    1-1-2011

    Document Type

    Article

    Language

    English

    First Page

    725

    Last Page

    744

    WOS Identifier

    WOS:000292442100015

    ISSN

    0928-7655

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