A Renewable Resource-based Ramsey Model with Costly Resource Extraction

This paper derives the analytical solution of arenewable resource-based Ramsey economy withcostly resource extraction. The goal is toascertain whether costly resource extractioncan induce nonlinear dynamical properties in the system. We find that the solution for a model with constant technology can exhibit multiple steady states,and the comparative statics effects for consumption,utility, and the stock of nature capital areambiguous in a number of different cases. Moreover, thesolution for a model with exogenous technological progress exhibits unusual comparative dynamics andthe possibility of multiple balanced growthpaths. An increase in the rate of technologicalprogress induces a long-run growth rate in per capitaconsumption that depends on parameters of the productionfunction. Overall, technological progress inthe model can be less beneficial than in the standardeconomic growth model in which resourceextraction is costless. Copyright Kluwer Academic Publishers 2004