Handbook on the Economics of Natural Resources

Handbook on the Economics of Natural Resources

Edited by Robert Halvorsen and David F. Layton

The topics discussed in the Handbook on the Economics of Natural Resources are essential for those looking to understand how best to use and conserve the resources that form the foundation for human well-being. These include nonrenewable resources, modeling of biological resources, conservation of biological resources and water resources. The expert contributors of this Handbook provide solutions to many of the problems that growing populations now face, and sketch the likely future developments in the field of natural resource economics whilst paving the way for new thinking.

Chapter 3: Empirical evidence on the theory of nonrenewable resource economics

John Livernois and Henry Thille

Subjects: economics and finance, environmental economics, environment, environmental economics


The literature on the economics of nonrenewable resources has focused on modeling the long-run dynamic behavior of nonrenewable resource firms and the associated implications for markets. At the heart of the literature lies an analysis of the behavior of scarcity rent over time because of its central role in the determination of depletion and price profiles. True, market prices for nonrenewables are determined by the usual myriad of supply-side and demand-side factors, but the one factor that sets nonrenewable resource price determination apart from that in other markets is scarcity rent. Consequently, the determinants and behavior of scarcity rent has dominated the literature and captured the attention of economists. Theory predicts that scarcity rent rises at the rate of interest in the basic Hotelling (1931) model and rises less rapidly when extraction cost rises with depletion.

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