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A test of the Hotelling rule using old‐growth timber data
Author(s) -
Livernois John,
Thille Henry,
Zhang Xianqiang
Publication year - 2006
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.0008-4085.2006.00343.x
Subject(s) - stumpage , economics , common value auction , scarcity , resource (disambiguation) , microeconomics , econometrics , construct (python library) , renewable resource , contrast (vision) , natural resource economics , environmental economics , renewable energy , computer science , ecology , agricultural economics , computer network , artificial intelligence , biology , programming language
. The paper tests Hotelling's prediction that scarcity rent for a non‐renewable resource will rise at the rate of discount in a market equilibrium. We perform the test using data for old‐growth timber, a resource that is effectively non‐renewable. In contrast to previous studies, for this resource a measure of scarcity rent is directly observable in the form of stumpage price bids in timber auctions. We construct a model that allows for replanting and captures the institutional framework of the western U.S. timber market. The modified Hotelling rule that we derive is not rejected in several of our specifications.