@techreport{6aa74b28c16f4786a8a662ae55da1296,
title = "The Optimal Extraction of Non-Renewable Resources under Hyperbolic Discounting",
abstract = "In this paper, we investigate the effects of a declining social discount rate (SDR) on the optimal extraction of non-renewable resources and economic growth. For this purpose, we introduce time-consistent hyperbolic utility discounting into models of resource extraction. First, we investigate a small model of pure resource extraction holding constant the magnitude of discounting for hyperbolic and exponential discounting. We show that resource use is more conservative under hyperbolic discounting resulting in a permanently higher resource stock. Second, we introduce hyperbolic discounting into the seminal Dasgupta-Heal-Solow-Stiglitz (DHSS) model and derive analytically that positive long-run consumption growth requires a lower rate of technological progress under hyperbolic discounting. We show numerically that resource use is more conservative under hyperbolic discounting in the medium- and long-run.",
keywords = "Hyperbolic discounting, Social discount rate, Non-renewable resource extraction, Dasgupta-Heal-Solow-Stiglitz model",
author = "Dugan, {Anna M.} and Timo Trimborn",
year = "2020",
month = dec,
language = "English",
series = "Economics Working Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2020-17",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",
}