Policy Rules for Exploitation of Renewable Resources: A Macroeconomic Perspective
Posted: 9 Dec 1996
Date Written: August 12, 1996
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.
JEL Classification: O11, O41, Q20, Q28
Suggested Citation: Suggested Citation