nep-res New Economics Papers
on Resource Economics
Issue of 2017‒04‒16
four papers chosen by
Maximo Rossi
Universidad de la República

  1. Optimal Growth with Resource Exhaustibility and Pollution Externality By Wei Jin; Alan Woodland
  2. Optimal tax policy under heterogeneous environmental preferences By Marcelo Arbex; Christian Trudeau
  3. Fair Management of Social Risk By Marc Fleurbaey; Stephane Zuber Zuber
  4. Public Goods and Ethnic Diversity: Evidence from Deforestation in Indonesia By Alberto Alesina; Caterina Gennaioli; Stefania Lovo

  1. By: Wei Jin (School of Economics, UNSW Business School, UNSW); Alan Woodland (School of Economics, UNSW Business School, UNSW)
    Abstract: This paper investigates a problem of optimal growth with resource exhaustibility and pollution externality, based on a unified framework that explicitly considers augmentable man-made capital, exhaustible resource reserves, and accumulative environmental pollutants as three stock variables for optimal control analysis. Characterizations of the social optimum show that for any given man-made capital and resource reserves, resource extraction flows generated in optimal growth with both resource exhaustibility and pollution externality are smaller than those with only resource exhaustibility, and taking account of pollution externality resulting from resource extraction reduces the growth rate of consumption if man-made capital and natural resources are complements in final goods production. Existence, uniqueness and comparative statics of the steady state are analyzed. Conditions for transitional dynamics stability of optimal growth with resource exhaustibility and pollution externality are established. Expositions are made on whether allocations in a market equilibrium are consistent with the social optimum outcomes.
    Keywords: Sustainability; Economic Growth; Exhaustible Resources; Pollution Externality; Environmental Damage; Optimal Control Problems.
    JEL: Q54 H23 Q43 Q32 O13 O44 C61
    Date: 2017–03
  2. By: Marcelo Arbex (Department of Economics, University of Windsor); Christian Trudeau (Department of Economics, University of Windsor)
    Abstract: Abstract We model a federation of two heterogeneous jurisdictions where agents value consumption vs. nature differently. Consumption obtained through pollution-inducing production also generates a negative externality on neighbors. We show that even with a decentralized policy we can obtain first-best efficiency by choosing a combination of pollution taxes in both regions and lump-sum transfers. Moreover, we show that optimal pollution taxes are determined only by the externality parameters, independent of agents' preferences for consumption and nature.
    Keywords: Externalities, environmental preferences, optimal taxation.
    JEL: D62 H23 Q53 Q58
    Date: 2017–04
  3. By: Marc Fleurbaey (Princeton University); Stephane Zuber Zuber (Paris School of Economics)
    Abstract: We provide a general method for extending social preferences defined for riskless economic environments to the context of risk and uncertainty. We apply the method to the problems of managing unemployment allowances (in the context of macroeconomic fluctuations) and catastrophic risks (in the context of climate change). The method guarantees ex post fairness and pays attention to individuals’ risk attitudes, while ensuring rationality properties for social preferences, revisiting basic ideas from Harsanyi’s celebrated aggregation theorem (Harsanyi, 1955). The social preferences that we obtain do not always take the form of an expected utility criterion, but they always satisfy statewise dominance. When we require social preferences to be expected utilities, we obtain a variant of Harsanyi’s result under a weak version of the Pareto principle, and a maximin criterion under a stronger Pareto requirement, whenever the ex post social ordering does not depend on people risk attitudes. We also show how non-expected utility individual preferences can be accommodated in the approach.
    JEL: D63
    Date: 2016–12
  4. By: Alberto Alesina; Caterina Gennaioli; Stefania Lovo
    Abstract: This paper shows that the level of deforestation in Indonesia is positively related to the degree of ethnic fractionalization at the district level. To identify a casual relation we exploit the exogenous timing of variations in the level of ethnic heterogeneity due to the creation of new jurisdictions. We provide evidence consistent with a lower control of politicians, through electoral punishment, in more ethnically fragmented districts. Our results bring a new perspective on the political economy of deforestation. They are consistent with the literature on (under) provision of public goods and social capital in ethnically diverse societies and suggest that when the underlying communities are ethnically fractionalized decentralisation can reduce deforestation by delegating powers to more homogeneous communities.
    Keywords: Deforestation, Ethnic Diversity, Corruption, Indonesia.
    JEL: D73 H0 L73
    Date: 2016–12

This nep-res issue is ©2017 by Maximo Rossi. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.