nep-res New Economics Papers
on Resource Economics
Issue of 2010‒10‒02
seven papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Can Incomplete Information Lead to Under-exploitation in the Commons By Ana Espinola-Arredondo; Felix Munoz-Garcia
  2. A Tale of Two Externalities: Environmental Policy and Market Structure By Ana Espinola-Arredondo; Felix Munoz-Garcia
  3. Environmental Regulation in the Presence of an Informal Sector By Soham Baksi; Pinaki Bose
  4. On the Optimal Taxation of Common-Pool Resources By Georgios Kossioris; Michael Plexousakis; Anastasios Xepapadeas; Aart de Zeeuw
  5. Three Key Elements of Post-2012 International Climate Policy Architecture By Sheila M. Olmstead; Robert N. Stavins
  6. The Environment and Directed Technical Change By Daron Acemoglu; Philippe Aghion; Leonardo Bursztyn; David Hemous
  7. The Problem of the Commons: Still Unsettled After 100 Years By Stavins, Robert N.

  1. By: Ana Espinola-Arredondo; Felix Munoz-Garcia (School of Economic Sciences, Washington State University)
    Abstract: This paper analyzes the protection of a common pool resource (CPR) through the manage- ment of information. Speci?cally, we examine an entry deterrence model between an incumbent perfectly informed about the initial stock of a CPR and an uninformed potential entrant. In our model, the appropriation of the CPR by the incumbent reduces both players?future pro?ts from exploiting the resource. In the case of complete information, we show that the incumbent operating in a high-stock common pool overexploits the CPR during the ?rst period since it does not internalize the negative external e¤ect that its ?rst-period exploitation imposes on the en- trant?s future pro?ts. This ine¢ ciency, however, is absent when the common totally regenerates across periods. Under incomplete information, we identify an additional form of ine¢ ciency. In particular, the incumbent operating in a low-stock CPR underexploits the resource in order to signal the low available stock to potential entrants, deterring entry. When the common fully regenerates, we show that such underexploitation becomes more signi?cant since the low-stock incumbent aims to protect its larger monopoly pro?ts.
    Keywords: Common Pool Resources; Signaling games; Externalities
    JEL: L12 D82 Q20 D62
    Date: 2010–04
  2. By: Ana Espinola-Arredondo; Felix Munoz-Garcia (School of Economic Sciences, Washington State University)
    Abstract: This paper examines the two externalities that a country's environmental regulation imposes on other country's welfare: an environmental externality, due to transboundary pollution, and a competitive advantage externality, as regulations affect domestic firms' abatement costs, which impact the profits of their foreign competitors. We first analyze the emission standards that countries independently set under different market structures and then compare them with the standards set under international environmental agreements that internalize one or both types of externalities. The paper hence disentangles the effect of each externality. We show that firms’ profits increase when countries participate in international treaties if the environmental damage from pollution is relatively low and such pollution is not significantly transboundary. We hence demonstrate that international environmental agreements can serve as cooperative devices firms use to ameliorate overproduction and increase profits, without the need to form collusive agreements.
    Keywords: Transboundary pollution, strategic environmental policy, international environmental agreement, market structure
    JEL: C72 F12 H23 Q28
    Date: 2010–05
  3. By: Soham Baksi; Pinaki Bose (Department of Economics, The University of Winnipeg)
    Abstract: We analyze the e¢ cacy of environmental regulation in the presence of an endoge- nous informal sector. Firms in an imperfectly competitive formal sector produce a .nal good using a polluting intermediate good. The .rms can either produce the intermediate good or purchase it from a price-taking informal sector. An en- vironmental regulator sets the emission intensity of the intermediate good that all formal sector .rms implement honestly but informal sector .rms seek, and are sometimes able, to evade. We show that, depending on the stringency of the reg- ulation and its enforcement, the informal sector can act as a source of pollution leakage. Stricter regulation can increase (when the .composition e¤ect.of regula- tion dominates its .scale e¤ect.) or decrease total pollution, and may even have a non-monotonic impact. Further, price discrimination by the formal sector, when it purchases the intermediate good from the informal sector, can worsen regulatory compliance by the informal sector and lead to lower welfare.
    JEL: Q56 O17 K42
    Date: 2010–05
  4. By: Georgios Kossioris (Department of Mathematics, University of Crete); Michael Plexousakis (Department of Applied Mathematics, University of Crete); Anastasios Xepapadeas (Athens University of Economics and Business and Beijer Fellow); Aart de Zeeuw (TSC, Tilburg University and Beijer Fellow)
    Abstract: Recent research developments in common-pool resource models emphasize the importance of links with ecological systems and the presence of non-linearities, thresholds and multiple steady states. In a recent paper Kossioris et al. (2008) develop a methodology for deriving feedback Nash equilibria for non-linear differential games and apply this methodology to a common-pool resource model of a lake where pollution corresponds to benefits and at the same time affects the ecosystem services. This paper studies the structure of optimal state- dependent taxes that steer the combined economic-ecological system towards the trajectory of optimal management, and provides an algorithm for calculating such taxes.
    Keywords: Differential Games, non-linear Feedback Nash Equilibria, Ecosystems, Optimal State-dependent Tax
    JEL: Q25 C73 C61
    Date: 2010–09
  5. By: Sheila M. Olmstead (chool of Forestry and Environmental Studies, Yale University, Resources for the Future); Robert N. Stavins (John F. Kennedy School of Government, Harvard University, Resources for the Future, National Bureau of Economic Research)
    Abstract: We describe three essential elements of an effective post-2012 international global climate policy architecture: a means to ensure that key industrialized and developing nations are involved in differentiated but meaningful ways; an emphasis on an extended time path of targets; and inclusion of flexible market-based policy instruments to keep costs down and facilitate international equity. This architecture is consistent with fundamental aspects of the science, economics, and politics of global climate change; addresses specific shortcomings of the Kyoto Protocol; and builds upon the foundation of the United Nations Framework Convention on Climate Change.
    Keywords: Global Climate Change, Global Warming, Policy Architecture, Kyoto Protocol
    JEL: Q54 Q58 Q48 Q39
    Date: 2010–07
  6. By: Daron Acemoglu (Massachusetts Institute of Technology and Canadian Institute for Advanced Research); Philippe Aghion (Harvard University, Stockholm School of Economics and Canadian Institute for Advanced Research); Leonardo Bursztyn (Harvard University); David Hemous (Harvard University)
    Abstract: This paper introduces endogenous and directed technical change in a growth model with environmental constraints. A unique final good is produced by combining inputs from two sectors. One of these sectors uses "dirty" machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both “carbon taxes” and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly: the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth.
    Keywords: Environment, Exhaustible Resources, Directed Technological Change, Innovation
    Date: 2010–07
  7. By: Stavins, Robert N.
    Abstract: The problem of the commons is more important to our lives and thus more central to economics than a century ago when Katharine Coman led off the first issue of the American Economic Review. As the U.S. and other economies have grown, the carrying-capacity of the planet — in regard to natural resources and environmental quality — has become a greater concern, particularly for common-property and open-access resources. The focus of this article is on some important, unsettled problems of the commons. Within the realm of natural resources, there are special challenges associated with renewable resources, which are frequently characterized by open access.An important example is the degradation of open-access fisheries. Critical commons problems are also associated with environmental quality. A key contribution of economics has been the development of market-based approaches to environmental protection. These instruments are key to addressing the ultimate commons problem of the twenty-first century — global climate change.
    Keywords: common-property resource, open-access resource, fisheries, global climate change
    JEL: Q22 Q28 Q50 Q54 Q58
    Date: 2010–09–22

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