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Existence and Efficiency of Stationary States in a Renewable Resource Based OLG Model with Different Harvest Costs

Author

Listed:
  • Farmer Karl

    (University of Graz, Graz, Austria)

  • Bednar-Friedl Birgit

    (University of Graz, Graz, Austria)

Abstract

In a renewable resource based overlapping generations (OLG) model without harvest costs, a complex combination of the time discount factor, the resource production share, and the natural regeneration rate ensure the existence of a stationary market equilibrium and its intergenerational efficiency when the own rate of return on natural capital is positive. This paper investigates to what extent previous findings carry over to an OLG economy with two types of unit harvest costs (constant, inverse stock dependent) arising from the competition for labor between resource harvesting and resource processing. In contrast to the model without harvest cost, we show why large unit harvest costs, surprisingly, do not require a complex combination of basic parameters for the existence of a stationary state, and that in the model with stock dependent costs intergenerational efficiency might occur even when the own rate of return on natural capital is negative.

Suggested Citation

  • Farmer Karl & Bednar-Friedl Birgit, 2017. "Existence and Efficiency of Stationary States in a Renewable Resource Based OLG Model with Different Harvest Costs," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 62(3), pages 3-32, December.
    • Handle: RePEc:vrs:subboe:v:62:y:2017:i:3:p:3-32:n:1
    DOI: 10.1515/subboec-2017-0011
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    Keywords

    Renewable resources; harvest costs; overlapping generations; existence; intergenerational efficiency;
    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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