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The optimal management of renewable resources under the risk of potential regime shift

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  • Ren, Bijie
  • Polasky, Stephen

Abstract

Complex dynamic systems can undergo changes in feedbacks between system components causing a rapid and persistent shift in system behavior (“regime shifts”), and potentially reduce welfare from declining provision of important ecosystem services. In this paper, we provide an analytical condition that determinfilefs whether the threat of a potential regime shift causes management to be more aggressive or more precautionary. In numerical simulations we find that aggressive management can occur for reasonable parameter values, which is counter prior results that the potential for harmful regime shift always leads to precautionary management.

Suggested Citation

  • Ren, Bijie & Polasky, Stephen, 2014. "The optimal management of renewable resources under the risk of potential regime shift," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 195-212.
    • Handle: RePEc:eee:dyncon:v:40:y:2014:i:c:p:195-212
    DOI: 10.1016/j.jedc.2014.01.006
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    More about this item

    Keywords

    Optimal management; Uncertainty; Growth; Renewable resources; Regime shift;
    All these keywords.

    JEL classification:

    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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