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Time consuming resource extraction in an overlapping generations economy with capital

Author

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  • Birgit Bednar-Friedl
  • Karl Farmer

Abstract

For worldwide fisheries production, two major trends emerge for the next decades: a significantly larger role for aquaculture and reduced output due to climate change impacts. While the former leads to an increase in cost, the latter affects natural regeneration. To address both impacts, we investigate the relevance of resource extraction costs for a private property fishery in an intertemporal general equilibrium model with capital accumulation, commodity production and a labor market. We show how the extraction cost parameter—in addition to time preference, technology and natural regeneration—matters for the existence (and stability) of an economically feasible, nontrivial stationary state. Higher extraction costs increase the equilibrium resource stock, while a reduced regeneration rate (e.g. due to climate change) decreases the stock. Moreover, resource extraction overshoots its new equilibrium value after the cost shock while after a regeneration shock extraction levels adjust monotonically towards the new equilibrium. Copyright Springer-Verlag Wien 2013

Suggested Citation

  • Birgit Bednar-Friedl & Karl Farmer, 2013. "Time consuming resource extraction in an overlapping generations economy with capital," Journal of Economics, Springer, vol. 110(3), pages 203-224, November.
    • Handle: RePEc:kap:jeczfn:v:110:y:2013:i:3:p:203-224
    DOI: 10.1007/s00712-012-0318-0
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Renewable resources; Time consuming extraction costs; Overlapping generations; Resource shocks; C62; D90; Q20;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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