Sharing the Global Benefits of Finite Natural Resource Exploitation: A Dynamic Coalitional Stability Perspective
19 Pages Posted: 30 Jan 2020
Date Written: December 2019
The article explores the implications of natural resource scarcity in terms of global cooperation and trade. We investigate whether there exist stable international long-term agreements that take into account the disparities between countries in terms of geological endowments and productive capacity, while caring about future generations. For that purpose, we build an original cooperative game framework, where countries can form coalitions in order to optimize their discounted consumption stream in the long-run, within the limits of their stock of natural resources. We use the concept of the recursive core that satisfies both coalitional stability and time consistency. We show that this set is nonempty, stating that an international long-term agreement along the optimal path will be self-enforcing. The presented model can be viewed as a tool to refresh the common look at the North-South opposition and sets the conceptual framework for the exploration of a fair sharing of the fruits of global economic growth.
Keywords: Non-renewable natural resources, Cooperative games, Recursive core
JEL Classification: C71, C61, F42, Q20, Q32, Q56
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