Journal of Economics

, Volume 110, Issue 3, pp 203–224

Time consuming resource extraction in an overlapping generations economy with capital

Article

DOI: 10.1007/s00712-012-0318-0

Cite this article as:
Bednar-Friedl, B. & Farmer, K. J Econ (2013) 110: 203. doi:10.1007/s00712-012-0318-0
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Abstract

For worldwide fisheries production, two major trends emerge for the next decades: a significantly larger role for aquaculture and reduced output due to climate change impacts. While the former leads to an increase in cost, the latter affects natural regeneration. To address both impacts, we investigate the relevance of resource extraction costs for a private property fishery in an intertemporal general equilibrium model with capital accumulation, commodity production and a labor market. We show how the extraction cost parameter—in addition to time preference, technology and natural regeneration—matters for the existence (and stability) of an economically feasible, nontrivial stationary state. Higher extraction costs increase the equilibrium resource stock, while a reduced regeneration rate (e.g. due to climate change) decreases the stock. Moreover, resource extraction overshoots its new equilibrium value after the cost shock while after a regeneration shock extraction levels adjust monotonically towards the new equilibrium.

Keywords

Renewable resourcesTime consuming extraction costsOverlapping generationsResource shocks

JEL Classification

C62D90Q20

Copyright information

© Springer-Verlag Wien 2012

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of GrazGrazAustria