commodity taxes under uncertainty abstract this paper considers the relative distorting effect on output of commodity taxes specific and ad valorem in a situation where a firm faces revenue uncertainty it is shown generally that this effect depends both on the precise nature of the firm s revenue uncertainty and on the degree of its risk aversion more specifically the distorting effect of each tax is characterised for a selection of objective functions and uncertain environments these characterisations are compared in order to show the influence of alternative specifications on the relative distorting effect

nonrenewable resources with switching costs abstract this paper considers a firm s decision to commence or to suspend extraction of a nonrenewable resource when there are start up or shut down costs for a given level of reserves the critical price that would cause an inactive mine to be opened exceeds the price that would induce an active mine to be closed as one would expect greater switching costs cause firms to be less inclined to change status this impact can be substantial even for modest switching costs possible implications of switching costs are considered including the potential for firms to abandon mines with economically valuable remaining reserves

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

short run impacts of a severance tax change evidence from alaska energy states face a fundamental tradeoff when increasing severance tax rates potential gains in tax revenues versus potential losses in exploration development and production activity despite the significant implications of this tradeoff there is very little empirical evidence on the short run responsiveness of extraction related activities to changes in severance taxes we conduct a comparative case study to evaluate the short term impact of a severance tax increase on oil related activities and development in alaska in 2007 the introduction of alaska s clear and equitable share aces more than tripled the tax liability for much of the oil already under production in alaska we construct a synthetic alaska from a set of u s energy states with the purpose of estimating the counterfactual evolution of oil production exploration and development wells gross state product and employment in the absence of aces overall our results indicate that there is no discernible difference in the outcome variables of interest between alaska and its synthetic control after the implementation of aces suggesting that aces had a minimal effect on alaskan oil related activity and development in the short run

a model of exhaustible resource exploitation with ricardian rent abstract the question of the optimal rate of development of an exhaustible resource such as a mine has long been a concern of resource economists however with few exceptions in the literature it has been implicitly assumed that orebodies are of uniform quality readily distinguished from their surroundings or else that the mining firm is able to choose the order of mining from sections of the mine which may vary in quality e g grade of ore while such simplifying assumptions have led to a rich array of conclusions they stand in contrast to the varying conditions facing the mining engineer in making cut off grade decisions this paper models a situation where because of orebody configurations the firm cannot choose to mine in order of grade an optimal cut off grade is obtained for each point of time of the mine s life in the case of a socially optimizing firm then in a special case the effects of monopoly and various types of mineral taxation are considered for the cut off grade decision and for ultimate recovery

nonconvexity efficiency and equilibrium in exhaustible resource depletion we consider the problem of efficiency and existence of a competitive equilibrium in exhaustible resource markets where extraction costs are nonconvex nonconvexity is shown to imply that 1 efficient extraction ceases to the left of the minimum efficient scale i e where average costs exceed marginal costs and 2 a competitive equilibrium does not exist introduction of a backstop technology which induces a flat portion of the industry demand curve restores both existence and efficiency provided that the backstop price is sufficiently low if firms face even a small amount of uncertainty regarding their rivals stocks a backstop technology is sufficient to restore existence of competitive equilibrium even if the backstop price is very high in this case however the competitive equilibrium is not efficient

a microeconometric test of the theory of exhaustible resources abstract this paper generalizes extant developments of the economic theory of exhaustible resource production derives and extends a halvorsen and smith 1991 quarterly journal of economics 106 123 140 type test of the theory and applies the test to a sample of natural gas resources to facilitate our empirical test we extend the model developed in chermak and patrick 1995 journal of environmental economics and management 28 174 189 to explicitly account for the fact that the extracted resource gross product must be processed to obtain the final saleable product duality theory is used to derive econometric models with which the theory is statistically tested using panel data from 29 natural gas wells shadow prices of the resource stock through time which are generally unobservable but necessary for the test are estimated via the indirect cost function contrary to the extant literature we find inter alia that i at any point in time ceteris paribus the in situ resource price a decreases with gross production and b increases with final production and ii we cannot reject the theory of exhaustible resources i e producer behavior is consistent with the theory

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

keynesian models of deflation and depression revisited abstract this paper extends tobin s tobin j 1975 keynesian models of recession and depression american economic review 65 195 202 keynesian analysis of deflation to include a range of additional channels through which deflation exacerbates keynesian unemployment the paper provides further theoretical reasons why downward price level adjustment may not solve the keynesian problem these arguments challenge the received wisdom that keynes general theory is a special case resting on downwardly rigid prices and nominal wages this conventional wisdom has led many economists to recommend policies promoting downward flexibility these policies have created an environment in which deflation is more likely giving new relevance to keynesian analysis of deflation

explosive oil prices spectacular oil price increases occur on a regular basis the most recent one is dated july 2008 this paper puts forward the notion that extreme oil price movements of this type can be described as temporary explosive the paper applies a forward recursive unit root tests and finds evidence of explosive behavior in the following periods 1990 1991 2005 2006 and 2007 2008 currently existing oil price models are not capable of appropriately describing this type of behavior a thorough discussion of the underlying reasons of these price hikes indicates these oil price episodes even though extreme are mainly fundamentally explained this finding is insufficiently acknowledged in the literature on speculative oil price bubbles thus policy interventions as response to extreme movements of this kind need to be very carefully thought through

cycles in natural resource commodity prices an analysis of the frequency domain abstract a model is derived that relates price cycles to investment behavior in the mineral industries and predicts that these cycles will be roughly twice as long as the investment period the period between the investment decision and the project completion spectral techniques are used to estimate the principal cycles in metal and fuel prices for the metals the estimated cycle lengths reinforce the model predictions however no significant cycles are found in the prices of the fuels the lead lag relationships between prices of different commodities are also investigated and are found to be significant for those that are jointly produced

a micromodeling approach to investigate the advertising sales relationship the purpose of this paper is to derive a model of advertising effects on the firm s sales a micromodel is postulated and aggregated across individuals and over time to produce a macromodel of the aggregate sales advertising relationship for a single product the micromodel postulated is very simple it incorporates two factors reach of the ads and rate of decay of their effectiveness over time this approach to modeling advertising effects is shown to be fruitful in several respects 1 the coefficients of the aggregate equation are easily interpretable in terms of the reach and decay parameters 2 the model derived is nonlinear yet estimable 3 a special case of the model is very similar to lag models that have been in use 4 the model can be used whatever the unit of time is 5 the carryover effect of advertising as commonly defined is not constant but depends upon the previous spending levels and 6 the model helps illustrate that the duration of advertising may be greatly overstated if aggregate lagged dependent variable models are simplistically interpreted

recovering measures of advertising carryover from aggregate data the role of the firm s decision behavior data interval bias the biased estimation of advertising carryover in aggregate data can be viewed as a misinterpretation of the aggregate advertising sales relationship due to missing micro advertising data this paper argues that if the researcher does not explicitly model the firm s advertising decisions he will incorrectly interpolate the missing data and thereby allow the firm s decision behavior to influence inferences about advertising carryover drawing upon a general model of advertising decision behavior the expected aggregate form of the koyck relationship is developed and compared to existing bias correction methodologies although it is difficult to find any parsimonious procedure which is robust with respect to all types of decision behavior allowing lagged advertising to enter the classical koyck equation emerges as a simple method of obtaining a reasonable estimate of advertising carryover in aggregate data

the cut off grade and the theory of extraction the cutoff grade problem arises when technological infeasibility or high cost prevents an extractive firm from exploiting a heterogeneous deposit in strict sequence the optimal cutoff grade varies directly with anticipated changes in present value price a stochastic price path induces a higher lower initial cutoff grade if the marginal profit function is concave convex the optimal response to an unanticipated price change depends on the difference between the rates of change in price along the new and original price paths and whether or not the firm can increase extractive capacity including the life of the mine

demographic growth harrodian in stability and the supermultiplier a basic kaleckian model is enriched by three simple intuitive assumptions first there is a redistributive system of the wage bill between employed and unemployed workers the latter receiving subsistence income second only individuals with an income above the subsistence level build savings the combination of these two assumptions gives rise to an autonomous consumption component whose rate of growth depends on population growth consequently the rate of capital accumulation spontaneously converges towards the rate of population growth the supermultiplier effect a dynamic that offers a solution to one of the two harrodian instability problems the third assumption corresponds to entrepreneurs attempts to adjust investments to restore the normal rate of capacity utilisation although this assumption usually generates knife edge instability we show here that the stabilising properties of the supermultiplier provided that the accelerator effect is not overly strong help overcome this instability and realise the normal rate of capacity utilisation therefore the model may offer a simple simultaneous solution to the two harrodian instability problems

the supply of non renewable resources there exists no formal treatment of non renewable resource nrr supply systematically deriving quantity as function of price we establish instantaneous restricted fixed reserves and unrestricted nrr supply functions the supply of a nrr at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations besides the usual law of supply which characterizes the own price effect cross price effects have their own law they can be decomposed into a substitution effect and a stock compensation effect we show that the substitution effect always dominates a price increase at some point in space and time causes nrr supply to decrease at all other points this new but orthodox supply setting extends to nrrs the partial equilibrium analysis of demand and supply policies thereby it provides a generalization of many results about policy induced changes on nrr markets the properties of restricted and unrestricted supply functions are characterized for hotelling homogeneous as well as ricardian non homogeneous reserves for a single deposit as well as for several deposits that endogenously come into production or cease to be active

intertemporal effects of environmental mandates environmental mandates can impose large costs on the businesses that must comply with them understanding the effects of those costs on production decisions may require a dynamic framework if environmental damages and the costs of complying with mandates depend on cumulative production or the passage of time this paper focuses on the time dimension of general categories of fixed and variable costs arising from different types of mandates the paper develops an optimal control model to predict how such costs may jointly affect current production rates plant closure dates and cumulative production theoretical results derived from the comparative statics of the system of equations describing the solution to that model identify circumstances in which the policy goals of greater production and greater environmental protection may not always be at odds

an identification robust test for time varying parameters in the dynamics of energy prices summary we test for the presence of time varying parameters tvp in the long run dynamics of energy prices for oil natural gas and coal within a standard class of mean reverting models we also propose residual based diagnostic tests and examine out of sample forecasts in sample lr tests support the tvp model for coal and gas but not for oil though companion diagnostics suggest that the model is too restrictive to conclusively fit the data out of sample analysis suggests a random walk specification for oil price and tvp models for both real time forecasting in the case of gas and long run forecasting in the case of coal copyright 2010 john wiley sons ltd

economic indicators of resource scarcity a critical essay abstract the theoretical arguments of the conceptual and empirical literature on economic indicators of long run resource scarcity are logically flawed if resource allocators were informed of the nature of resource scarcity their behavior and the economic indicators it generates would reflect the scarcity but if they were so informed we could simply ask them if resources were scarce if they are not informed their behavior and economic indicators are as likely to indicate their ignorance as the reality unfortunately there is no way of knowing whether they are informed or not unless we already know whether resources are scarce

price expectations ore quality selection and the supply of a nonrenewable resource abstract economic models of depletion imply that the present value price of a resource and the quality of extracted ore should be directly related the empirical evidence is that in the short run the average quality of extracted ore and in some cases metal output decline in response to a price increase this paper examines a model of extraction with heterogeneous ore quality within a deposit and revised price expectations in which this seemingly paradoxical supply response is rationalized as the outcome of ore quality selection which maximizes the present value of the mine

trends in natural resource commodity prices deterministic or stochastic abstract the type of trend be it stochastic or deterministic exhibited by the price of a resource commodity should play a critical role in the development and empirical verification of theories which may explain its long run behavior the nature of the trend however can only be discerned through empirical testing to this end we present a menu of unit root testing procedures for characterizing observed trends in any economic time series including natural resource commodity prices we examine the prices of 11 resource commodities the evidence suggests that five price series exhibit stochastic trends while the remaining six price series appear to be stationary around a deterministic trend

demand led growth and accommodating supply we model of demand led growth with endogenous adjustment of labour supply and productivity an approach that reconciles harrod s warranted rate of demand growth with supply the model delivers a range of growth paths and unemployment rates rather than a single natural rate theoretically the steady state growth path may be dynamically stable or unstable but empirical calibration favours stability we show analytically that if demand dynamics are stable supply will converge to the demand determined growth path while a minimum unemployment rate ultimately imposes a supply constraint on growth empirical results show that a wide range of growth rates are feasible across different demand regimes the results explain how economies can become trapped with low growth due to weak demand or fiscal austerity and suggest policy responses to stagnant demand

exploration and scarcity noting that a suggested measure of natural resource scarcity resource rent is unobservable we show that rent is linked to observable marginal exploration cost a two period model of extraction and exploration reveals that rent is equal to this cost when discovery is certain under risky exploration cost data can be used to bound rent the model also indicates how exploration uncertainty affects the competitive firm s extraction and exploration decisions finally the behavior of u s oil and gas exploration costs suggests that these costs were rising in the postwar era which has different implications for scarcity than indicated by other measures of scarcity

how do oil producers respond to giant oil field discoveries abstract the classical hotelling model predicts that the optimal extraction level rises immediately after an unexpected resource discovery whereas in reality there are substantial adjustment costs in petroleum production and an average lag of several years between a discovery and the start of production using a large panel of country level production data and a difference in differences identification approach i show that domestic production levels respond before a newly found oil field comes on line and that this increase is driven by non opec producers consistent with different responses of opec and non opec drilling activity offshore fields and exceptionally large super or mega giant fields are also more likely to raise country level production given that domestic petroleum consumption rises by less in response to a discovery at least part of the increase in production seems to go into net oil exports

testing the efficiency of extraction from a stock resource the theoretical conditions for efficient extraction from a known stock resource by a competitive mining firm are reviewed these conditions are tested using proprietary data from a mining firm output price data and coefficient estimates from a translog cost system are used to compute the in situ value of the resource and the stock effect changes in the in situ value over time are then statistically compared with the expected price path the results reject the hypothesis that the data are consistent with the theoretical model and the maintained hypotheses variations of the basic model that incorporate a time varying discount rate an alternative expected price series and a constraint on the rate of output are also tested and rejected 46 references 10 tables

existence and transversality conditions for a general unbounded horizon model of the mining firm abstract this paper derives conditions under which optimal programs exist for a general model of the competitive or monopolistic mining firm the model significantly extends and synthesizes previous formulations by including both resource extraction and discoveries of new reserves with stock dependent resource exploitation costs and incomplete resource exhaustion endogenous technical innovation and state dependent resource demand in addition the analysis addresses complications arising from having optimal programs defined over an unbounded horizon with the possibility of either a finite or infinite terminal time and a non zero terminal salvage valuation if the terminal time is finite the necessity of the infinite horizon transversality conditions also is established the paper illustrates a strongly intuitive approach to existence questions for infinite horizon or unbounded horizon control problems with weaker concavity and interiority assumptions than are often encountered in the literature

intertemporal aggregation of heterogeneous consumers abstract this paper deals with a relatively unexamined facet of stochastic brand switching models their connection to market share models we derive a composite market share model based on aggregation of heterogeneous markovian type individuals each purchasing a brand from the product class several times during the period of analysis the characteristics of this composite model are examined and interestingly suggest a markov type market share model moreover this examination sheds some light on a phenomenon uncovered in econometric studies of market share response to advertising the slow decay of the lagged market share term as the length of the measurement period is increased

the optimal production of an exhaustible resource when price is exogenous and stochastic this paper examines the optimal production of a resource such as oil when its price is determined exogenously e g by a cartel such as opec and is subject to stochastic fluctuations away from an expected growth path we first examine the dependence of production on extraction cost and show that the conventional exponential decline curve is indeed optimal if marginal cost is constant with respect to the rate of extraction but is a hyperbolic function of the reserve level we next show that uncertainty about future price affects the optimal production rate in two ways first if marginal cost is a convex concave function of the rate of production stochastic fluctuations in price raise lower average cost over time so that there is an incentive to speed up slow down production second the option value of the reserve i e the ability to withhold production indefinitely and never incur the cost of extraction provides an incentive to slow down the rate of production

a contribution to the theory of depletable resource scarcity and its measures a contribution to the theory of depletable resource scarcity and its measures i introduction the question of devising suitable measures of the scarcity of natural resources has received considerable attention in the past quarter century beginning with the classic study of barnett and morse 1963 this literature includes a long series of articles of which the collection edited by smith 1979 is an excellent example and which for the moment culminates with the illuminating paper by hall and hall 1984 the present paper expands upon hall and hall s review of the received literature following this a stylized model of exhaustible resource production builds upon some of the classical insights the model suggests that it may be worthwhile to de emphasize the use of unit cost and of rent as measures of scarcity at least in a ricardian context where firms are physically constrained to mine varying qualities of ore simultaneously it also de emphasizes the importance of the question of ultimate exhaustibility of the resource rather it emphasizes the role of capital which is sometimes neglected in extraction models and thereby the role of the exhaustibility of the deposit in influencing the choices of an extracting firm ii classical and classic treatments malthus and ricardo as elaborated by barnett and morse differed in their treatment of agricultural land malthus 1798 assumed a fixed quantity of land 1 so that food production could be expanded to feed a growing society at the extensive margin until the land constraint was reached thereafter more food could be obtained only at higher costs by exploiting the intensive margin ricardo 1817 was at once more pessimistic and more optimistic the quality of land was non homogeneous the best land would be farmed first so that diminishing returns would result from any expansion costs at the extensive and intensive margins would rise and would continue rising as population increased 2 while ricardo did emphasize the role of the intensive margin he did not discuss an ultimate limit even though he was obviously aware of one ricardo lived on an island and had corresponded with malthus instead he advocated removal of trade barriers as a means of avoiding the need to move further into the extensive as well as intensive margin hall and hall 1984 365 6 discern four types of scarcity in the non renewable resource literature namely malthusian and ricardian flow and stock scarcities their discussion is summarized in table i the important questions are 1 whether a limit on total quantity produced is envisaged 2 whether the resource is of uniform quality or whether there are depletion effects which cause quality to decrease through time and 3 whether marginal extraction costs rise at any time as a result of constraints inherent in the characteristics of the resource the distinguishing feature of malthusian scarcities turns on the existence of an ultimate limit to total production which in turn reflects malthus s emphasis on the ultimate fixity of the quantity of cultivable land the distinguishing feature of the ricardian scarcities is that there is no ultimate limit to land rather than diminishing returns at the extensive margin 3 with these definitions malthusian flow scarcity is the most general concept there are three columns in table i with binary entries in each column thus a total of 2 sup 3 8 types of scarcity can be imagined using this classification scheme table ii extends table i to include all eight possibilities and then categories the entries most of the categories have interpretations and are treated in the literature even more importantly it is clearer than in table i that attaching the labels malthusian or ricardian is sometimes suggestive but that trying to stretch the malthusian and ricardian notions developed for self renewing agricultural land to mining can lead to inaccuracies and possibly to confusion

taxation of nonrenewable resources at various stages of production a general method of assessing tax policy effects in exhaustible resource industries is derived the model includes both extraction and processing by a vertically integrated firm and taxation can occur at any stage of production many of the standard results of the theoretical resource taxation literature are derived in a unified framework when stages of production are introduced it is seen that tax policy effects can differ dramatically from those predicted by the simpler model after the method of determining the effects of existing taxes is derived a procedure for designing taxes that achieve desired goals is analysed

a neo kaleckian goodwin model of capitalist economic growth monopoly power managerial pay and labour market conflict this paper presents a neo kaleckian goodwin model of growth and distribution the key innovation is the introduction of managerial pay kaleckian monopoly power determines the functional distribution of income and goodwin labour bargaining power determines the wage bill division the model helps explain slower us growth over the past 30 years for much of that period the functional distribution of income was relatively constant but growth slowed because income inequality increased owing to a wage bill shift from workers to managers the wage bill division effect explains why economies can display wage led and profit led characteristics economies can be profit led regarding functional income distribution and wage led regarding wage bill distribution

income equivalence and a proposed resource rent charge abstract we demonstrate the equivalence of various income based charges when perfect certainty prevails as well as deviations from equivalence under uncertainty some of these equivalences are known but the derivations of others such as cases for two types of free equity are not these equivalences lay the foundation for a proposed accrued rent charge arc as an alternative to resource rent taxes rrt both as proposed and implemented we argue that the arc may be preferred to the rrt because the timing of returns to investors owners of reproducible capital and owners of natural assets coincide that is returns accrue to owners of natural assets earlier in time with the arc relative to the rrt in addition we argue that while both charges are inefficient when there is uncertainty the arc may be relatively more administratively and economically efficient finally we use simulations to compare the arc to the rrt and to standard income charges and discuss the results

a meta analysis of marketing communication carryover effects abstractto optimally set marketing communication marcom budgets reliable estimates of short term elasticities and carryover effects are required empirical generalizations from meta analyses of prior field studies can help guide these decisions however the last such meta analysis of marcom carryover effects was performed on koyck model based estimates collected before 1984 and was confined to mass media advertising the authors update and extend extant empirical generalizations via two meta analyses of carryover estimates compiled from studies encompassing personal selling targeted advertising and mass media advertising using diverse model forms until 2015 the first is focused on and utilizes 918 estimates of the carryover proportion of the total effect termed long term share of the total effect and the second focuses on 863 derivable estimates of 90 implied duration intervals the authors find the mean long term shares of the total effect for personal selling 687 and targeted advertisin

severance taxes and market structure in an exhaustible resource industry abstract this paper compares the effects of a severance tax on profit maximizing competitive and monopolistic firms which explore and produce an exhaustible resource the producers response to the tax are studied and the deadweight losses from the tax are calculated time paths of exploratory effort extraction and price are computed severance taxes lead both producers to reduce production and exploration and cause a shift in the time path for prices the deadweight losses from the tax are low especially in competition the losses in the monopoly case are relatively higher with the tax burden falling mainly on the monopolistic producer

the real real price of nonrenewable resources copper 1870 2000 over the past 40 years economists have devoted considerable effort to estimating long run trends in real commodity prices the results indicate that the real prices for many commodities have fallen suggesting to the surprise of many that resource scarcity is declining over time almost all of this work however uses the u s producer price index or other standard price deflators which recent research shows overestimate inflation for several reasons this article examines copper prices with adjusted deflators designed to eliminate this bias it finds that the trend over time which is significantly downward when no adjustment is made to the deflator displays no tendency in either direction or is significantly upward depending on the magnitude of the deflator adjustment employed these findings suggest that real resources prices provide less support than widely assumed for the hypothesis that resources are becoming more available or less scarce over time

taxation ore quality selection and the depletion of a heterogeneous deposit of a nonrenewable resource abstract the effect of taxation on depletion is examined when ore quality varies within a deposit and the firm s selection of the sequence of exploitation is constrained tax policies in this setting are less conserving of the resource than if ore quality is homogeneous and can be less conserving of the resource than in other models of ore quality selection for example a constant severance tax can induce faster depletion decrease the life of the mine reduce total recovery and increase metal output in periods when extraction is positive

cost specification and firm behaviour in a hotelling model of resource extraction in applied resource economics much attention has been focused on the ability of the hotelling model to explain observed firm behavior in this paper a preliminary specification search is performed to determine the appropriate cost function parameterization for the firms in the sample before proceeding to the estimation of the euler equation once a cost function specification is chosen the corresponding euler equation is estimated via the generalization method of moments gmm which allows for better estimates of the euler equations than in previous studies even with the preliminary specification search and the use of gmm estimation the behavior of the panel of fourteen canadian copper mining firms in the data set examined does not seem to be consistent with the basic hotelling model used

grade selection under uncertainty least cost last and other anomalies abstract grade selection rules for heterogeneous resource deposits with increasing marginal extraction costs are derived it is shown that contrary to the conventional wisdom it can be optimal to extract the least cost deposits last there are a number of rules that are compatible with dynamic profit maximization under certainty nevertheless none explains empirical regularities in actual extraction patterns when uncertainty about future price is introduced however the theoretical model conforms closely not only to observed grade selection patterns but also to observed mineral industry price paths

resource characteristics extraction costs and optimal exploitation of mineral resources this paper modifies the traditional theories ofnon renewable resource exploitation where reserve sizeis assumed to be the major determinant of extractioncosts in a competitive model of resourceexploitation characteristics of aggregate reservesare considered as a determinant of extraction cost then dynamic solutions for the price and exploratoryefforts are developed various price paths arefeasible under different assumptions with regard tothe changes in the reserve characteristics over time past empirical research shows that there is noconsistent price path for all materials in fact itis the quality of newly discovered reserves as well astheir size that has affected material prices todemonstrate the complexity of a firm s decision torecover mineral from new deposits potentials forsubstantial high quality marine mineral resources areevaluated as a substitute for land based resources however several factors including the decreasingtrend in marine mining r d expenditures and thepotential impact of large scale marine mining on priceof minerals indicate that mining of mostnon hydrocarbon marine minerals will not take place inthe near future

carryover effects and temporal aggregation in a partial adjustment model framework this paper discusses the impact of aggregating time series observations on the specification of an econometric model in the framework of a familiar sales response model temporally aggregated specifications are derived it is illustrated that different aggregation schemes provide different models each of them having appealing characteristics furthermore the derived specifications illustrate that frequently calibrated models are misspecified and as such provide biased estimates which significantly affect the interpretation of the results some suggestions are provided for estimating the exact specifications in such a way that the obtained parameter estimates provide correct insights into the underlying response process

tackling the instability of growth a kaleckian harrodian model with an autonomous expenditure component this article presents a basic kaleckian model enriched by the simultaneous addition of an harrodian investment function and an autonomous expenditure component that grows at an exogenous rate the model shows that the usual short run properties wage led growth are only transient since the long run growth rate converges towards that of autonomous expenditures however the impact on the level of variables output capital stock labour etc is permanent the model also provides a conditional solution to the second harrod knife edge problem the destabilising behaviour of firms as they adjust their investment decisions to the discrepancy between the actual and the normal rates of capacity utilisation is now required to achieve the normal rate of capacity utilisation

an econometrics view of worldwide fossil fuel consumption and the role of us crude oil coal and gas known as fossil fuels play a crucial role in the global economy this paper proposes new econometrics modelling to demonstrate the trend of fossil fuels consumption the main variables affecting consumption trends are world reserves the price of fossil fuels us production and us net imports all variables have been analysed individually for more than half a century the research found that while the consumption of fossil fuels worldwide has increased trends in the us production and net imports have been dependent on the type of fossil fuels most of the us coal and gas production has been for domestic use which is why it does not have a strong influence on worldwide fossil fuel prices moreover the reserves of fossil fuels have not shown any diminution during the last couple of decades and predictions that they were about to run out are not substantiated the nominal and real price of fossil fuels was found to change depending on the type finally estimates of three econometric models for the consumption of fossil fuels from 1949 to 2006 are presented which identify the effects of significant variables

strike when the force is with you optimal stopping with application to resource equilibria optimal investment in a nonrenewable resource project occurs when the rate of increase of the project s forward value falls to the force of interest this stopping rule yields a financial interpretation of resource quality as being a property of the project rather than of individual units of reserves it also leads to re interpretations of a rent as the present value of the project rather than of units of reserves and b hotelling s insight as not a rule for the path of rents but an equilibrium algorithm for price the analysis is extended to sequential development of pesticides antibiotics and forests

a note on the effect of tax brackets on non renewable resource extraction abstract tax brackets are a common feature of non renewable resource taxes although the introduction of brackets would seem to be an innocuous way of approximating a non linear tax system the dynamic effects are surprising this paper shows that the presence of tax brackets in both a severance tax system and a profits tax system can induce the extractive firm to depart from the well known monotonically declining extraction profile and to choose instead a profile which has constant extraction rates over some interval of time

sectoral supply of minerals of varying quality in this sectoral model of mineral production investment in capacity and variation in orebody grade and volume help explain some stylized facts more than one grade of ore may be exploited simultaneously mine exhaustion but not necessarily entry occurs in declining order of grade the price may rise or fall but is likely to fall initially young industry and must eventually rise at less than the interest rate unless demand expands rapidly these trends exhibit fluctuations due to entry and exhaustion of deposits resource price cyclicality is reinforced because mines keep producing at capacity when the price is falling

estimating micro relationships from macro data a comparative study of two approximations of the brand loyal model under temporal aggregation the data interval bias issue in econometric studies of the relationship between advertising and sales first was discussed in jmr by clarke in 1976 within the last few years several studies report

trends in world energy prices the correct identification of the time series path of non renewable energy resources has far reaching consequences for economists and policymakers alike this study builds on the existing literature by employing a data series that includes a sample period of institutional change and recently developed unit root testing procedures besides crude oil natural gas and coal prices are also examined aiming to further the knowledge of non renewable energy resource time paths in order to inform future research and update the conclusions of past studies the unit root tests allow for structural breaks and are based on the procedures developed by zivot and andrews 1992 lumsdaine and papell 1997 and lee and strazicich 2003 finally we investigate whether the trend changes signs in the regimes which are bounded by the structural breaks and quantify the prevalence of the trends over the sample period considered the results show that the trend is not well represented by a single positive or negative trend the variability of the trend suggests that forecasting energy prices should not typically occur about a single trend

the efficient use of multiple sources of a nonrenewable resource under supply cost uncertainty whereas in a deterministic world leaving a high cost source of a nonrenewable resource untouched as long as a less costly source is available is always efficient this may not be the case in a stochastic world conditions are derived under which it can be efficient to use a risky supply source in order to conserve a cheaper nonrisky source or to use a costly nonrisky source while a less costly risky source is still available a supply embargo can be interpreted as a limiting case the nonrisky source can be reinterpreted as an artificial stockpile

optimal taxation of exhaustible resource under monopoly abstract this paper deals with the problem of using taxes or subsidies to correct the inefficient resource allocation under monopoly in this paper the question raised is what would be the optimal tax on resource extraction under monopoly ultimately it is shown that taxes may be devised to generate price and extraction paths under monopoly that are identical to those under the competitive equilibrium tax policy can thus be used as an instrument for changing the distortionary resource allocation generated by the monopolist

simple rules to order irreversible income alternatives sequentially abstract we identify a simple sufficient condition for optimal sequential exploitation of a set of income generating alternatives if these are identical except for differences in the standard deviation of income the condition implies that the optimal ordering is obtained by always setting the most uncertain alternative up front if the alternatives are identical except for differences in flow fixed operating costs then depending on the magnitudes of cost differentials the optimal sequential ordering may or may not be to produce in order of increasing costs

distribution aggregate demand and productivity growth theory and empirical results for six oecd countries based on a post kaleckian model empirical research based on the bhaduri marglin variant of the kaleckian model has recently shown that aggregate demand in many medium sized and large open economies tends to be wage led in the medium to long run even in a period of increasing globalisation in this paper we extend this type of analysis and integrate the effects on productivity growth theoretically and empirically productivity growth is introduced into the theoretical model making use of the verdoorn effect or of kaldor s technical progress function and hence of a positive relationship between gdp or capital stock growth and productivity growth further on a cost push or marx hicks effect and hence a positive impact of real wage growth or the wage share on productivity growth is taken into account in the empirical part we estimate productivity growth equations for six countries introducing these two effects finally economic policy conclusions are drawn

temporal aggregation the data interval bias and empirical estimation of bimonthly relations from annual data in an important study reviewing the literature on econometric studies of the relationship between advertising and sales clarke clarke darral g 1976 econometric measurement of the duration of advertising effects on sales j marketing res 13 november 345 357 concluded that the implied duration interval of the effects of advertising on sales were too long when the studies used annual data a theoretical explanation is provided here for the observation of parameter estimates which vary with the data interval employed in the analysis parameter estimates are developed on the basis of data aggregated at various levels of temporal aggregation and compared with theoretical values it is demonstrated that it is possible to recover bimonthly parameters when only annual data are available

a characterization of oil price behavior evidence from jump models abstract this paper is concerned with the statistical behavior of oil prices in two ways it firstly applies a combined jump garch model in order to characterize the behavior of daily weekly as well as monthly oil prices secondly it relates its empirical results to implications of hotelling type resource extraction models the empirical analysis shows that oil prices are characterized by garch as well as conditional jump behavior and that a considerable portion of the total variance is triggered by sudden extreme price movements this finding implies that first oil price signals are not reliable and as a consequence both finding optimal extraction paths and decisions regarding the transmission to alternative technologies are likely to be compromised second this behavior is in stark contrast to the notion of deterministic trends in the price of oil

behaviour of non renewable natural resource firms under uncertainty optimizing or ad hoc abstract this paper tests the assumption of optimizing behaviour by natural resource firms in the framework of an intertemporal model of non renewable resource development and production using data from the petroleum industry it is argued that the presence of geological and price uncertainty presents a situation in which standard objections to non optimizing behaviour may not hold as an alternative it is proposed that firms use an ad hoc rule of thumb to update decisions as the values of variables change econometric results support ad hoc behaviour as opposed to intertemporal profit maximization

an application of depletion theory to a base metal canadian nickel advances in economic theory in the past decade have considerably increased our understanding of the implications of the depletability of important natural resources this paper an application of that theory seeks to estimate the depletion charge which should be imputed to canadian nickel by first estimating the quality characteristics of remaining reserves rather strong assumptions are required to derive a charge in excess of five per cent of the metal s value and it is concluded that the imputation of a significant user cost to canadian metal production would not be socially optimal une application de la theorie de lepuisement a un metal de base le nickel au canada certains travaux de theorie economique ont consid6rablement accrfu notre comprehension des consequences de l 6puisement de certaines ressources naturelles importantes ce memoire est une application des resultats de ces travaux il veut 6valuer le cofut d epuisement le cofut qu on devrait imputer a la d6gradation du stock de nickel canadien en 6valuant la qualite des reserves de nickel qui restent il appert que l on doit faire des hypotheses assez extremes pour deriver un cofut impute de plus de cinq pourcents de la valeur du metal comme cofut de la d6gradation des stocks donc on peut conclure que l imputation d un cofut d 6puisement important sur la production canadienne ne serait pas socialement optimal

history versus equilibrium and the theory of economic growth a model of cumulative causation is developed and the limits of this model as a characterization of historical rather than equilibrium long run growth outcomes are discussed an extension of the model which postulates that cumulative causation occurs in the context of technological and institutional regimes is proposed outcomes in the extended model are shown to be more influenced by history than those in the original model the extended model also addresses a number of recent criticisms of cumulative causation copyright 1997 by oxford university press

growth theory and economic structure new growth theory endogenises growth but neglects aggregate demand and distributional shifts in output and employment a model incorporating demand and structural change is introduced to assess the effects of greater integration of the ec the analysis shows that i the new growth model overstates the long run implications of integration and ii identical effects on productivity growth can be achieved by reducing unemployment it is argued that the benefits of lower unemployment are more certain of achievement than those expected from reduced barriers to trade and resource movement and that stronger demand is a pre requisite for realization of the latter with the rise of the new growth theory romer 1986 many economists foresee the end of the long dominance of neoclassical growth theory new growth theorists make the general point that within their framework the rates of growth of productivity and per capita income and changes in these growth rates are endogenously explained their main criticism of neoclassical growth theory is that it attributes these growth rates to exogenous determinants and that this is not an explanation new growth theory is to be commended for its efforts to endogenize growth but it none the less retains two shortcomings in common with neoclassical growth theory it neglects the effects of 1 distributional shifts in output and employment and 2 aggregate demand in this paper we argue that these must be included in order to develop a research strategy that permits reasonable measures of the impact of policy on growth rates to support this view we first outline the way in which neoclassical and new growth theory analyse and quantify the effects of increased competition and market size using in illustration the 1992 programme for greater economic integration of the ec we then introduce a model that is free of the defects of both approaches and use it to provide a clearer view of the static and dynamic effects of the 1992 changes these are then compared with the effect of policies to reduce unemployment the results show that 1 the new growth model overstates the long run implications of the 1992 measures and 2 identical effects on productivity growth can be achieved by a programme to reduce unemployment we conclude by arguing that the benefits of lower unemploy ment are more certain of achievement that those expected to flow from reduced barriers to trade and resource movement and that stronger demand is a pre requisite if the latter are to be realized we do not attempt to make quantitative estimates of the economic gains from 1992 or from reduced unemployment whether for the short medium or long run rather our paper can be seen as outlining a research strategy for

unemployment and the real wage the economic basis for contesting political ideologies using the keynesian theory of effective demand this paper demonstrates how particular models such as that of cooperative capitalism enunciated by the left keynesian social democrats the marxian model of profit squeeze emphasizing distributive conflict and even the conservative model relying on supply side stimulus fit in as particular variants of a more general theoretical scheme through a reconstruction of the familiar is schedule the argument is weaved around the theme of the relations between unemployment and real wage in the context of both a closed and an open economy to explain the common macroeconomic basis of contesting ideologies copyright 1990 by oxford university press

trends in natural resource commodity prices an analysis of the time domain abstract this paper attempts to reconcile the theoretical predictions of increasing real prices for nonrenewable natural resource commodities obtained from hotelling style models with the empirical findings of falling prices for these commodities a theoretical model for relative price movements is derived for the case of exogenous technical change and endogenous change in the grade of ores mined the model suggests a u shaped time path for relative prices the implied price movements are tested for all the major metals and fuels and the model parameters are found to be statistically significant for 11 out of the 12 commodities tested

optimal exploration for and exploitation of heterogeneous mineral deposits abstract we model exploration for and production from a multiple deposit nonrenewable resource exploration is viewed as a bayesian process involving learning about undiscovered reserves and is undertaken both to improve the quality of and to replenish known reserves known reserves are not physically defined but depend on the realizations of discrete episodes of exploration elsewhere and on decisions at each instant about the margin between ore to be mined and low grade material to be rejected the appropriate measure of resource scarcity the sustainable level of the contribution of the resource and the treatment of depletion in the national accounts are considered

the economics of exploration for non renewable resources abstract the literature on exploration for non renewable resources is surveyed following a brief synopsis in section 2 section 3 focuses on issues related to the world market for resources section 4 considers more microeconomic supply related issues linked to the exploration of the small region or play section 5 turns to the small but growing literature on exploration as a learning process related to r d the latter sections pay particular attention to empirical and policy aspects

schumpeter meeting keynes a policy friendly model of endogenous growth and business cycles this paper studies an agent based model that bridges keynesian theories of demandgeneration and schumpeterian theories of technology fueled economic growth we employ the model to investigate the properties of macroeconomic dynamics and the impact of public polices on supply demand and the fundamentals of the economy we find profound complementarities between factors influencing aggregate demand and drivers of technological change that affect both short run fluctuations and longterm growth patterns from a normative point of view simulations show a corresponding complementarity between keynesian and schumpeterian policies in sustaining long run growth paths characterized by milder fluctuations and relatively lower unemployment levels the matching or mismatching between innovative exploration of new technologies and the conditions of demand generation appear to suggest the presence of two distinct regimes of growth or absence thereof characterized by different short run fluctuations and unemployment levels

the taxation of nonreplenishable natural resources revisited abstract the theory of nonreplenishable resource extraction has been extended to allow for extraction costs which increase as deposits are increasingly depleted in these cases profit maximization may result in the cessation of extraction before reserves are totally exhausted the effect of various taxation policies on optimal extraction patterns in these models are derived with a few exceptions the results are that the imposition of a tax will cause operators to extract at faster rates over shorter periods of time and to reduce the total amount of ore extracted the analysis allows for an output price which increases over time

the role of investment in multiple deposit extraction some results and remaining puzzles abstract papers by olsen and by cairns and lasserre analyze equilibrium in a resource industry where deposit quality varies and where extraction requires capital investment the papers substantially qualify the conventional understanding of such matters as the form of hotelling s rule the role of deposit size the simultaneous extraction from deposits of different quality and the price path the argumentation however a intricate and the crucial role of investment as such a not easily distinguishable we clarify the intuition behind the results bring out the role of the various assumptions and raise important remaining issues

endogenous economic growth a new approach this new approach incorporates on the demand side the problem of effective demand and unemployment while rejecting on the supply side the oversimplistic use of a production function with or without capital labour substitution the focus on the adoption and diffusion of labour productivity growth permits viewing supply as being driven endogenously by inter class conflict over distribution as well as inter class conflict among rival firms over market shares the result is a race between growth rates in labour productivity and in the real wage rate which drives demand and productivity growth on the one hand while making wage share reasonably constant on the other the existence and stability properties of the steady state are also examined copyright 2006 oxford university press

stationarity changes in long run energy commodity prices abstract situated at the intersection of the literatures on speculative storage and non renewable commodity scarcity this paper considers whether changes in persistence have occurred in long run u s prices of the energy commodities crude oil natural gas and bituminous coal we allow for a structural break when testing for a break in persistence to avoid a change in the stochastic properties of prices being confounded by an unaccounted for deterministic shift in the price series we find that coal prices are trend stationary throughout their evolution and that oil prices change from stationarity to non stationarity in the decade between the late 1960s to late 1970s the result on gas prices is ambiguous our results demonstrate the importance of accounting for a possible structural shift when testing for breaks in persistence while being robust to the exact date of the structural break based on our analysis we caution against viewing long run energy commodity prices as being non stationary and conclude in favor of modeling commodity market fundamentals as stationary meaning that speculative storage will tend to have a dampening effect on prices we also cannot reject that long run prices of coal and with some hesitation gas follow a hotelling type rule in contrast we reject the hotelling rule for oil prices since the late 1960s early 1970s

capital income taxation depletion allowances and nonrenewable resource extraction abstract this paper analyses the distortionary effects of the corporate income tax on the output path of the resource sector and on the allocation of resources between the mining and non mining corporate sectors the cost of capital for a resource industry facing a corporate income tax is derived as well as the resulting effective tax rate on capital income the comparison of the effective tax rates of the mining and non mining sectors pays particular attention to the role played by the depletion allowance in assuring equal treatment

resource taxation with heterogeneous quality and endogenous reserves abstract this paper analyzes the impact of mining taxation on the intertemporal extraction profile for a heterogeneous ore body the extraction profile specifies both quantities and qualities extracted in each period total extraction is thus endogenously determined the taxes explicitly considered are severance taxes ad valorem or per unit on metal or on ore property taxes and profits taxes with depletion allowance the intertemporal framework integrates economic and geological factors generating new results on extraction distortions and providing qualification or reconciliation of previous diverse results in this area

untested hypotheses in non renewable resource economics the present paper reviews the literature on the empirical implications of the hotelling rule and suggests directions for further research in this area

a hotelling faustmann explanation of the structure of christmas tree prices we examine the relationship between a tree price and a tree age height using a hotelling faustmann type model of optimal plantation management which accounts for the possibility of replanting and biological growth the model predictions are tested using the data on christmas tree prices in north carolina collected in december 1997 the estimates show that in general the rates of change in prices between adjacent age cohorts reflect a competitive equilibrium in the capital market thus supporting the hotelling faustmann paradigm rigorous empirical testing of the basic economic models of optimal natural resource pricing has proven to be difficult the source of the difficulty has been the unavailability of micro level data on either prices or extraction harvest rates for in situ resource stocks 1 for nonrenewable resources hotelling s famous pricing rule has rarely been tested with firm level data stollery s study of the international nickel company of canada supported hotelling s rule and miller and upton s study of oil company values supported a corollary called the hotelling valuation principle most other studies such as halvorsen and smith and farrow have refuted this bedrock of natural resource economics in fact two studies of old growth timber essentially a nonrenewable resource provide some of the most compelling support for the hotelling model berck johnson

productivity and metal mining evidence from copper mining firms one of the aims of productivity measurement is to assess the performance of various sectors of the economy with respect to their use of scarce inputs in this paper the emphasis is on the effects of firm behaviour on simple index number measurement of total factor productivity in non renewable resource industries economic theory predicts that when the stock of ore is known and there is positive discount rate an intertemporally profit maximizing firm will often process the best ore first that is ores that are of high grade and or are most easily accessible will be correspond to the lowest cost units of final metal output less capital labour energy and matgerials will be needed in the mining and milling processes

non renewable resource prices deterministic or stochastic trends in this paper we examine temporal properties of 11 natural resource real price series from 1870 to 1990 recent studies by ahrens and sharma trends in natural resource commodity prices deterministic or stochastic j environ econom manage 33 1997 59 74 berck and roberts natural resource prices will they ever turn up j environ econom manage 31 1996 65 78 and slade grade selection under uncertainty least cost last and other anomalies j environ econom manage 15 1988 189 205 among others find that many non renewable resource prices have a stochastic trend we revisit this issue by employing a lagrangian multiplier unit root test that allows for two endogenously determined structural breaks with and without a quadratic trend contrary to previous research we find evidence against the unit root hypothesis for all price series our findings support characterizing natural resource prices as stationary around deterministic trends with structural breaks we additionally show that both pre testing for unit roots with breaks and allowing for breaks in the forecast model can improve forecast accuracy overall the results in this paper are important in both a positive and normative sense without an appropriate understanding of the dynamics of a time series empirical verification of theories forecasting and proper inference are potentially fruitless