Groupe d’études et de recherche en analyse des décisions

Sustainable growth in a two-country trade model under different property rights regimes for natural resources

Guiomar Martín-Herrán Professeure titulaire, Departamento de Economía Aplicada, Universidad de Valladolid, Espagne

We analyze the sustainability of the economic growth in a dynamic two-country trade model. The two economies are not symmetric but they differ in resource endowments and innovative activities. One country is a technological leader that invests in the expansion of the variety of productive inputs. Its counterpart is a technological follower country with no investment, and it is endowed with a natural resource. Technology diffuses from the leader to the follower country through the trade of new varieties of intermediate goods. The renewable natural resource is used as an essential input in the productive process of the follower country. The main goal of the paper is to analyze how the distribution of the property rights associated with this natural resource may affect the sustainable growth rate of the two economies. We analyze different property rights regimes depending on whether the property rights for the resource are equally distributed among consumers, or the resource is monopoly-owned. Furthermore, the location of these property rights in the leading or in the follower economy also matters.