Oct 28, 2008

BBL and Rigotnomics Working papers

I am please to announce next week's BBL. Alexandra will present her Rigotnomics working paper "Market structure and the allocation of resource rents"on Monday Nov. 3 at 12:15 in R3. Coffee, cookies, juice and snacks will be provided by the department. Here is the abstract:

Efficient exploitation of an oil well is a complex process involving sophisticated technology and equipment. This is why the majority, if not all, of the oil-producing developing nations rely on foreign companies specialized in oil-field development. The present study examines the interaction between the resource-rich economy and a foreign firm that provides extraction services. I analyze the country's optimal investment, consumption, and extraction profiles, as well as the optimal price-setting behavior of the foreign firm and the resulting allocation of resource rents between the two parties. The emphasis is put on the role of access to international credit markets for the resource-rich economy. It is shown that if the country is a price-taker in the oil market, access to credit does not matter at all. By contrast, if the country is a monopolist in the oil market and can lend and borrow internationally, it finds itself in a stronger bargaining position vis-à-vis the foreign provider and can, therefore, appropriate a larger share of resource rents. The country's capital stock and technological efficiency of the local extraction industry are two other important ingredients that affect the distribution of resource rents.

The Rigotnomics working papers series is a new feature of Rigotnomics that aims to contribute to the intellectual emancipation of our readers and research affiliates. We aim to reflect a broad spectrum of perspectives in the current sphere of academic research and policy debate, and therefore contribute to the attainment of greater economic outcomes. Any student, professor or alumni is welcomed to submit his paper to the Editor and we will be pleased to promote it.

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