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Title:Trade and migration with renewable natural resources: Out-of-steady-state dynamics PDF Logo
Authors:López, Ramón
Schiff, Maurice
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 4923
Abstract:Commodity price increases associated with the entry of China, India and other countries into the world economy has led to increased pressure on common-property renewable natural resources (NR). The problem is particularly worrisome for economies that obtain a large share of their income from the exploitation of NR in the production of an exportable commodity. This paper contributes to the analysis by examining the issue in the framework of a general equilibrium dynamic model and by solving for both the steady state and the transition dynamics. We show that i) a resource-rich, capital-poor economy is more likely to be subject to a natural resource curse and complete (irreversible) NR depletion; ii) the latter's likelihood rises with the relative commodity price and labor inflow; iii) a labor inflow under internal equilibrium results in a higher steady-state capital-labor ratio and manufacturing output, and unchanged NR and commodity output; iv) import and export taxes result in a larger steady-state NR and commodity output and a smaller capital stock and manufacturing output, and may prevent complete NR depletion; and v) the latter may also be prevented through capital inflows (foreign aid) and labor outflow (openness by the North), improved regulation, technical change and a production tax.
Subjects:Renewable natural resources
depletion
transition dynamics
steady state
trade
migration
capital flows
JEL:F22
O13
O15
Q17
Q27
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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