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Optimal Regulation And Growth In A Natural-Resource-Based Economy

Author

Listed:
  • José Ramón Ruiz Tamarit

    (Universitat de València)

  • Manuel Sánchez Moreno

    (Universitat de València)

Abstract

This paper develops a two-sector model for a renewable natural resource based economy. Pareto efficient results show the optimal harvesting rate that allows for sustained long-run optimal growth, which is upper-bounded by the biological rate of reproduction. Regulation prevents from resource over-exploitation and exhaustion which arise under open access. The Ramsey policy allowing the competitive economy to reach the first-best solution, leads the government to tax harvesting activity from firms and distribute the receipts among households. In the short-run the tax is variable. In the long-run, the lower the intrinsic rate of reproduction the higher the constant unit tax on the resource use.

Suggested Citation

  • José Ramón Ruiz Tamarit & Manuel Sánchez Moreno, 2006. "Optimal Regulation And Growth In A Natural-Resource-Based Economy," Working Papers. Serie AD 2006-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2006-21
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2006-21.pdf
    File Function: Fisrt version / Primera version, 2006
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    References listed on IDEAS

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    Cited by:

    1. Voosholz, Frauke, 2014. "The influence of different production functions on modeling resource extraction and economic growth," CAWM Discussion Papers 72, University of Münster, Münster Center for Economic Policy (MEP).

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    More about this item

    Keywords

    Natural Resources; Efficiency; Open Access; Ramsey Regulation; Growth.;
    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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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