A Model of Resource Conservation for Rural Subsistence Households

Abstract

This paper presents a dynamic model of a rural household that is economically dependent on the exploitation of a renewable natural resource. A special feature of the model is that resource utilization decisions are interrelated with consumption and work. It is shown that the existence of an income effect in resource stock and price changes is important to understand household behavior. Resource usage, for example, can decline as a result of a larger resource stock. It is also shown that under binding subsistence constraints taxation of the rural sector not only negatively affects rural household economic welfare, but also environmental resources.