Resource Depletion and Sustainability in Small Open Economies

Exogenous price changes affect the amount that a small country exporting natural resource commodities must invest to sustain its consumption level. The necessary amount is given by the difference between Hotelling rent and the discounted sum of future terms-of-trade effects (capital gains). The latt...

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Bibliographic Details
Published in:Journal of environmental economics and management 1997-07, Vol.33 (3), p.274-286
Main Authors: Vincent, Jeffrey R., Panayotou, Theodore, Hartwick, John M.
Format: Article
Language:English
Subjects:
Capital gains
Consumption
Economics
Environmental economics
Exports
LDCs
Natural resources
Open economies
Price variance
Prices
Resource depletion
Studies
Sustainable development
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Summary:Exogenous price changes affect the amount that a small country exporting natural resource commodities must invest to sustain its consumption level. The necessary amount is given by the difference between Hotelling rent and the discounted sum of future terms-of-trade effects (capital gains). The latter term is found to be large relative to the former in the case of petroleum depletion in Indonesia. This suggests that resource-rich countries will need to invest more than previously expected to sustain their consumption levels, if natural resource prices continue their long-term historical decline.
ISSN:0095-0696
1096-0449
DOI:10.1006/jeem.1997.0992