Specialization and Nonrenewable Resources: Ricardo Meets Ricardo

53 Pages Posted: 3 Jun 2005

Abstract

The one-demand Hotelling model fails to explain the observed specialization of nonrenewable resources. We develop a model with multiple demands and resources to show that specialization of resources according to demand is driven by Ricardian comparative advantage while the order of resource use over time is determined by Ricardian absolute advantage. An abundant resource with absolute advantage in all demands must be initially employed in all demands. When each resource has an absolute advantage in some demand, no resource may be used exclusively. The two-by-two model is characterized. Resource and demand-specific taxes are shown to have significant substitution effects.

Keywords: Comparative advantage, Dynamic models, Energy resources, Heterogenous demand, Hotelling theory

JEL Classification: D9, Q3, Q4

Suggested Citation

Chakravorty, Ujjayant and Roumasset, James A. and Krulce, Darrell, Specialization and Nonrenewable Resources: Ricardo Meets Ricardo. Available at SSRN: https://ssrn.com/abstract=593441

Ujjayant Chakravorty (Contact Author)

Tufts University ( email )

Medford, MA 02155
United States

James A. Roumasset

University of Hawaii at Manoa ( email )

Honolulu, HI 96822
United States
808-956-7496 (Phone)
808-956-4347 (Fax)

Darrell Krulce

Independent ( email )

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
92
Abstract Views
1,470
Rank
506,051
PlumX Metrics