Robin Boadway, Motohiro Sato, Jean-François Tremblay

Natural Resource Extraction in a Federation

Section: Articles
FinanzArchiv (FA)

Volume 74 () / Issue 1, pp. 34-51 (18)

18,00 € including VAT
article PDF
We analyze a natural resource extraction problem in a two-region economy with mobile labour. One region produces manufacturing goods while the other produces agriculture and extracts a non-renewable resource. Manufacturing production exhibits increasing returns-to-scale if the production level is sufficiently high. There are multiple long-run equilibrium labour allocations towards which the economy may converge. Under decentralized resource management, a tendency to over-extract the resource relative to the federal optimum makes convergence to a low-income equilibrium more likely. Optimal extraction from the federation's perspective satisfies a modified Hotelling's rule that takes into account the impact of resource extraction on manufacturing production.

Robin Boadway No current data available.

Motohiro Sato No current data available.

Jean-François Tremblay No current data available.