Complementarity, Impatience, and the Resilience of Natural-Resource - Dependent Economies
38 Pages Posted: 14 Nov 2011
Date Written: November 14, 2011
We study how human preferences affect the resilience of economies that depend on more than one type of natural resources. In particular, we analyze whether the degree of substitutability of natural resources in consumer needs may give rise to multiple steady states and path dependence even when resources are managed optimally. This is a major shift in the interpretation and analysis of resilience, from viewing (limited) resilience as an objective property of the economy-environment system to acknowledging its partially subjective, preference-based character. We find that society tends to be less willing to buffer exogenous shocks if resource goods are complements in consumption than if they are substitutes. Hence, the stronger the complementarity between the various types of resource goods, the less resilient the economy is.
Keywords: resilience, substitutes and complements, discounting, multiple steady states, natural resources, path dependence, regime shifts, tipping points
JEL Classification: C62, O13, Q01, Q20
Suggested Citation: Suggested Citation