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Open Access Renewable Resources, Urban Unemployment, and the Resolution of Dual Institutional Failures

Author

Listed:
  • Ichiroh Daitoh

    (Faculty of Business and Commerce, Keio University)

  • Nori Tarui

    (Department of Economics, University of Hawaii at Manoa and the University of Hawaii Economic Research Organization (UHERO))

Abstract

This paper investigates how poverty reduction and environmental resource preservation can be simultaneously achieved in a small open dual economy with urban wage rigidity, rural open access resources, and rural-urban migration. An increase in the export tax rate on the rural resource good increases urban unemployment in both the short and long run with resource dynamics. We find that the first-best policy, which makes the two goals compatible, is an urban wage subsidy combined with either a rural wage subsidy at a lower rate or, if the urban output price is sufficiently high, a rural tax. An increase in the export tax on the resource good could induce rural institutional change away from open access, but protection of urban manufacturing through a tariff hinders such rural institutional change.

Suggested Citation

  • Ichiroh Daitoh & Nori Tarui, 2019. "Open Access Renewable Resources, Urban Unemployment, and the Resolution of Dual Institutional Failures," Working Papers 201906, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201906
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    References listed on IDEAS

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    More about this item

    Keywords

    Open access; renewable resource; urban unemployment; rural-urban migration; export tax on the resource good; institutional change;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
    • F18 - International Economics - - Trade - - - Trade and Environment

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