Title

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

Authors

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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