Sharing the Global Benefits of Finite Natural Resource Exploitation: A Dynamic Coalitional Stability Perspective

19 Pages Posted: 30 Jan 2020

See all articles by Stéphane Gonzalez

Stéphane Gonzalez

University of Saint Etienne

Fatma Zahra Rostom

Centre d'Économie de la Sorbonne (CES) - Center of Economics of the Sorbonne (CES)

Date Written: December 2019

Abstract

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

Suggested Citation

Gonzalez, Stéphane and Rostom, Fatma Zahra, Sharing the Global Benefits of Finite Natural Resource Exploitation: A Dynamic Coalitional Stability Perspective (December 2019). Available at SSRN: https://ssrn.com/abstract=3515290 or http://dx.doi.org/10.2139/ssrn.3515290

Stéphane Gonzalez (Contact Author)

University of Saint Etienne ( email )

6, rue basse des rives
Saint Etienne, 42023
France

Fatma Zahra Rostom

Centre d'Économie de la Sorbonne (CES) - Center of Economics of the Sorbonne (CES) ( email )

106-112 bd de l'Hôpital
Paris, 75642
France

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