Trade and Depletion with a Resource Intensive Export

ABSTRACT

This article examines the dynamic general equilibrium of a small open economy producing a nonrenewable resource-intensive export and an import-competing good. Optimal depletion ties the rate of increase in the price of the resource to the capital return. Capital increases due to a constant saving rate and labor at a constant rate, potentially maintaining income as trade declines. Taxes on trade or depletion have transitory effects with underlying trends resuming. Trade and depletion with a constant depletion rate, tragedy of the commons, and a myopic resource owner are also considered.

KEYWORDS:

• Nonrenewable resource
• depletion
• trade

Disclosure statement

No potential conflict of interest was reported by the author.