Policy Rules for Exploitation of Renewable Resources: A Macroeconomic Perspective

Posted: 20 Jun 2001

See all articles by Anders Sorensen

Anders Sorensen

Copenhagen Business School - Department of Economics

Tryggvi Thor Herbertsson

University of Reykjavik

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Abstract

A fundamental problem for an economy based on a common property resource is the absence of a market to trade the resource. This implies that private costs are below social costs. This paper investigates possible government interventions that correct for such distortions in a neoclassical growth model with a production externality in harvesting. The model predicts that the welfare of the representative household increases considerably when a Piguovian tax is implemented. The policy that replicates the command optimum is highly complex and changes over time. On the other hand, a large share of the maximum welfare increase is internalized by introducing a constant quantity tax, suggesting that the potential of such policies is high.

Keywords: Resource Based Growth, Resource Rent, Problem of the Commons

JEL Classification: O11, O41, Q20, Q28

Suggested Citation

Sorensen, Anders and Herbertsson, Tryggvi Thor, Policy Rules for Exploitation of Renewable Resources: A Macroeconomic Perspective. Environmental and Resource Economics, Vol. 12, No. 1, 1998. Available at SSRN: https://ssrn.com/abstract=263024

Anders Sorensen (Contact Author)

Copenhagen Business School - Department of Economics ( email )

Porcelaenshaven 16A
DK-2000 Frederiksberg
Denmark
+45 3815 3493 (Phone)
+45 3815 2576 (Fax)

HOME PAGE: http://www.cbs.dk/en/staff/aseco

Tryggvi Thor Herbertsson

University of Reykjavik ( email )

Reykjavik
Iceland
+354 8613162 (Phone)

HOME PAGE: http://www.ru.is

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