Optimal growth, exhaustible resources, and the balance of payments
Dynamic aspects of resource extraction in open economies are studied in the framework of intertemporal allocation theory. More specifically, the optimal paths of capital accumulation and resource depletion are studied in economies exporting exhaustible resources in exchange for other foreign products and/or borrowing in international capital markets. Throughout, the utilitarian criterion of social optimality is adopted and the optimization problems in question are solved using the techniques of Optimal Control Theory. First, the optimal paths of capital accumulation and resource extraction are considered in the case of a resource-exporting economy. One of the results is that the economy exhausts the resource in finite time and tends asymptotically to a saddle-point equilibrium. Second, the optimal growth of a small economy that employs the resource as an essential input and imports foreign technology is scrutinized. It is demonstrated that the transformed dynamic system tends to a steady state and, while per capita consumption and the level of technology grow at a constant rate, the resource stock and the rate of extraction decline exponentially over time. The analysis revealed that, under certain assumptions, the optimal path of per-capita consumption is determined by the relative magnitudes of the given interest rate and the rate of social discount and that resource extraction declines at a constant rate.
- Research Organization:
- Indiana Univ., Bloomington (USA)
- OSTI ID:
- 5317724
- Resource Relation:
- Other Information: Thesis (Ph. D.)
- Country of Publication:
- United States
- Language:
- English
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