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Technology Adoption in the Presence of an Exhaustible Resource: The Case of Groundwater Extraction
Author(s) -
Shah Farhed A.,
Zilberman David,
Chakravorty Ujjayant
Publication year - 1995
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243539
Subject(s) - resource (disambiguation) , diffusion , natural resource economics , economics , groundwater , function (biology) , technological change , environmental economics , computer science , computer network , geotechnical engineering , engineering , physics , macroeconomics , evolutionary biology , biology , thermodynamics
In this paper we integrate technology diffusion within Hotelling's exhaustible resource model. The modern technology is a conservation technology such as drip irrigation used with groundwater. Resource quality heterogeneity and rising water prices are responsible for the gradual adoption of the modern technology, and under reasonable conditions the diffusion curve is an S‐shaped function of time. Without intervention, the diffusion process will be slower than is socially optimal, and optimal resource use tax will accelerate the diffusion of the conservation technology and slow down excessive resource depletion caused by market failure due to open access conditions.