Management of Nonrenewable Natural Resources under the Hotelling Rule

This book provides strong empirical evidences that support the Hotelling model of the exploitation of nonrenewable natural resources. It consists of three chapters addressing issues related to the behavior of the in-situ price, market price and the optimal extraction rate of nonrenewable natural resources. Exploiting the theoretical Hotelling model with technological progress and stock effect, the first chapter develops an empirical framework to estimate and evaluate the in-situ price of nonrenewable natural resources using average extraction cost data as proxy for marginal cost. The Second chapter estimates an empirical switching Hotelling model to test for linearity in their stock of the optimal extraction rates of nonrenewable natural resources. The last chapter takes a capital asset pricing approach to the determination of the price of a nonrenewable natural resource in the case where the resource is durable, in the sense that once extracted it becomes a productive asset held above ground.