TECHNOLOGICAL-CHANGE AND THE DYNAMICS OF RESOURCE SCARCITY MEASURES

Within a general competitive model of resource extraction, this paper investigates the effect of technological change on the time paths of resource scarcity measures (cost, price, and rent) and the possible relationship between them. It shows that the effect of technological change depends crucially on whether it is ''extraction-biased'' or ''depletion-biased.'' It derives conditions under which the three measures move together and, when they do not, it argues in favor of rent as a more reliable indicator of scarcity change. The theoretical insights obtained here help to explain both the sharp contrast of empirical results regarding the time trend of a specific measure as well as the observed lack of harmony among the time paths of the measures. (C) 1995 Academic Press, Inc.