International Trade and Open Access Renewable Resources: The Small Open Economy Case
39 Pages Posted: 15 Sep 2000 Last revised: 22 Sep 2022
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International Trade and Open Access Renewable Resources: The Small Open Economy Case
International Trade and Open Access Renewable Resources: The Small Open Economy Case
Date Written: February 1995
Abstract
This paper develops a two-sector general equilibrium model of an economy with an open access renewable resource. We characterize the autarkic steady state, showing that autarky prices (and 'comparative advantage') are determined by the ratio of intrinsic resource growth to labor. Under free trade, steady state trade and production patterns for a small open economy are determined by whether the resource good's world price exceeds its autarky price. Strikingly, if the small country exports the resource good while remaining diversified, then steady-state utility is lower than in autarky, and increases in the world price of exports are welfare-reducing.
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