Public versus Private Ownership of Exhaustible Resources in Models of Economic Growth with Heterogeneous Consumers

We develop two models of economic growth with exhaustible natural resources, exogenous technical progress and consumers heterogeneous in time preferences. The first model assumes private ownership of natural resources. In the second model, natural resources are public property and the resource extraction rate is chosen by voting. We show that the long-run rate of growth is determined by the discount factor of the most patient consumer in the case of private property and by the median discount factor in the case of public property. It follows that if the discount factors of consumers are given exogenously, the long-run rate of growth under the private property regime is higher than or equal to that under the public property regime. However, if high income inequality decreases effective discount factors of consumers, then public property can result in a higher rate of growth than private property.