EXHAUSTIBLE RESOURCE ALLOCATION, INTERGENERATIONAL EQUITY, AND SUSTAINABILITY

An OLG model with exhaustible resources and solar energy is developed, and equilibrium time paths are characterized numerically using recursive methods. For the parameter values considered, resource prices increase over time, and extractions, output, and utility decline over time until a steady-state is reached. Decreasing the intertemporal elasticity of substitution or raising consumers' subjective discount rate hastens exhaustion of the resource stock. Market equilibrium can result in much quicker use of the stock than social optimality under a constant discount rate, with consequent higher utility for early generations and lower utility for future generations in contrast to social optimality.


Issue Date:
1996-04
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/31654
Published in:
Agricultural and Resource Economics Review, Volume 25, Number 1
Page range:
60-67
Total Pages:
8




 Record created 2017-04-01, last modified 2017-08-24

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