Essays on natural resource development, international trade, and the environment

The dissertation addresses two major issues in resource and environmental economics: dynamic resource development under uncertainty when there is no market failure, and the interaction between market failure and resource dynamics in the presence of trade. Chapters 2 and 3 show how the cost structures of resource development and restoration affect the optimal decisions. Chapters 4 and 5 study the effects of international trade on environment and welfare when there are market failures in environmental use.; In Chapter 2, I extend Real Option Theory to evaluate resource development with the possibility of costly restoration. The fixed cost of restoration has continuous impacts, in addition to the fixed effects, on the level of development and restoration. The value of the project may not be convex in the underlying random variable, and discounting may encourage the pattern of developing now and restoring later.; In Chapter 3, I evaluate the effects of the current reform toward considering nonstructural measures in resource development. I study a particular form of nonstructural measure, conservation technology. I show that when there is fixed cost of development, the reform may not delay or reduce development depending on the level of the new technology.; In Chapter 4, I study the effects of trade on resource use and welfare when there is property right differences between the trading partners. Trade may reduce (increase) welfare in the long run when the environment is quite fragile (resilient). It may cause an environmentally poor country to "drag down" its richer partner. Alternatively, trade may enable the environmentally richer country to "pull up" its partner. The direction of trade may change over time, but in steady states it is either inefficient or indeterminate.; In Chapter 5, I use the model of Chapter 4 to study the instantaneous and long run effects of environmental reform. Harmonization upward and downward both tend to increase instantaneous world welfare. Harmonization upward has more beneficial long-run effects than harmonization downward. In the short run there is a conflict between environmental protection and reduction of unemployment, but, in the long-run the two goals are consistent.