ECONOMIC GROWTH AND DYNAMICS OF RENEWABLE RESOURCE WITH HOUSING, AGRICULTURAL AND RESOURCE LAND USE

This paper develops an economic growth model of land use with capital accumulation and dynamics of renewable resource. The economy consists of the industrial, agricultural and renewable resource sectors and the land is distributed among housing, agricultural production and resource growth. The model synthesizes the main ideas in the Solow growth, the Ricardian two-sector economic model, and the logistic model in resource economics in a compact framework. With some specified values of the parameters, we demonstrate that the economic system has a unique equilibrium point. We also conduct comparative dynamic analysis with regard to changes in the industrial sector’s total productivity, the propensities to consume the resource, to consume housing and to save. For instance, our simulation result demonstrates that when the propensity to consume the renewable resource is increased, the land distribution is not affected; both the consumption level and price of the resource are increased; the resource sector increases its output and employs more labor and capital, but the stock of the resource falls over time; the total capital stock and the capital inputs to the agricultural and industrial sectors are reduced; the rate of interest is increased but the wage rate is reduced; less labor is employed by the industrial and agricultural sectors; and the land rent and the price of agricultural good are reduced. Our model also predicts some results different from the growth model with renewable resource by Eliasson and Turnovsky (2004).