Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/38889
Authors: 
van der Ploeg, Frederick
Year of Publication: 
2010
Series/Report no.: 
CESifo working paper Resources and Environment 2981
Abstract: 
For a country fractionalized in competing factions, each owning part of the stock of natural exhaustible resources, or with insecure property rights, we analyze how resources are transformed into productive capital to sustain consumption. We allow property rights to improve as the country transforms natural resources into capital. The ensuing power struggle about the control of resources is solved as a non-cooperative differential game. Prices of resources and depletion increase faster than suggested by the Hotelling rule, especially with many competing factions and less secure property rights. As a result, the country substitutes away from resources to capital too rapidly and invests more than predicted by the Hartwick rule. The power struggle boosts output but depresses aggregate consumption and welfare, especially in highly fractionalized countries with less secure property rights. The theory suggests that adjusted net saving estimates calculated by the World Bank using market prices over-estimate welfare-based measures of genuine saving.
Subjects: 
exhaustible resources
Hotelling rule
Hartwick rule
capital
sustainable consumption
fractionalization
seepage
insecure property rights
differential game
genuine saving
adjusted net saving
JEL: 
E20
F32
O13
Q01
Q32
Document Type: 
Working Paper

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