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Title:
|
|
| Number: | 03-05 |
| Author: |
Ujjayant
Chakravorty , Darrell Krulce and James Roumasset
|
| Issue Date: | April 2003 (Revised, November 2004) |
| Abstract: | The one demand Hotelling model fails to explain the observed
specialization of nonrenewable resources in specific end-uses. We
develop a model with
multiple demands and multiple resources and grades. Principles of
Ricardian
absolute and comparative advantage play an important role in
determining
the extraction profile. Absolute advantage in all end-uses creates a
tendency
for the dominant resource to be used first. But comparative advantage
induces
specialization of particular resources in specific end-uses. The 2 x 2
model
of energy use is characterized, illustrating the trade-off between least-cost-first and resource specialization. The multiple-demand model also facilitates the analysis of resource and/or end-use-specific taxation. |
* Journal of Economic Dynamics and Control, forthcoming
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