| Abstract: |
Commodity price increases associated with the entry of China, India, and other
countries into the world economy have led to increased pressure on
common-property renewable natural resources. The problem is particularly
worrisome for economies that obtain a large share of their income from the
exploitation of natural resources 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. The authors show that i) a
resource-rich, capital-poor economy is more likely to be subject to a"natural
resource curse"and complete (irreversible) depletion of natural resources; 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
natural resources and commodity output; iv) import and export taxes result in
larger steady-state natural resources and commodity output and smaller capital
stock and manufacturing output, and may prevent complete depletion of natural
resources; and v) the latter may also be prevented through capital inflows
(foreign aid), labor outflow ( liberalization of the North's immigration
policy), improved regulation, technical change, and a production tax. |