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Shared renewable resources and gains from trade under technology standards
Author(s) -
Takarada Yasuhiro,
Dong Weijia,
Ogawa Takeshi
Publication year - 2020
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12651
Subject(s) - stock (firearms) , renewable resource , economics , exploit , resource productivity , resource (disambiguation) , industrial organization , natural resource economics , productivity , international trade , business , environmental economics , renewable energy , resource allocation , market economy , economic growth , engineering , computer science , mechanical engineering , computer network , computer security , electrical engineering
Abstract Using a two‐country, two‐good model of international trade, we examine gains from trade and strategic interaction in resource management among countries that share renewable resources such as fishery stocks. Two goods are a resource good, which is the harvest of the shared stock, and some other good that may be thought of as manufactures. The productivity of the resource good depends on harvesting technology and the stock level. This paper focuses on technology standards (e.g., restrictions on fishing gears, vessels, areas, and time) over other methods for resource management because they are most commonly implemented in fisheries. Technology standards are modeled as a restriction on the harvesting technology; that is, under strict technology standards, firms exploit resources as if they are using inferior harvesting technology. We show that an opening up of trade may reduce the shared stock and cause steady‐state utility to decrease in a resource‐good importing country and increase in a resource‐good exporting country. Strikingly, when the shared stock is in jeopardy (a high demand for the harvest), steady‐state harvest is maximized after an opening up of trade by what we call multilateral resource management in this paper and both countries gain from trade.