Essays on growth of an integrated economy of human and biological resources

This thesis analyzes development of a small low-income economy that is endowed with a renewable natural resource. The analysis is carried out in two stages. Stage one expands the neoclassical growth model to include a home production sector that specializes in harvest of the open access resource. There exist two saddle path stable steady states. The interior steady state preserves the natural resource despite its open access nature while the corner steady state depletes the natural resource. The initial endowment of resource and capital assets determines which steady state the economy converges. If the economy starts with higher level of assets capital deepening occurs relatively quickly and labor productivity in the formal sector grows rapidly. This results in higher wages, which create an incentive to pull labor away from the informal harvest and preserve the natural resource. On the contrary if the economy starts with lower levels of both assets by the time the capital stock accumulates to draw more labor into the formal sector the natural resource has already been depleted. In addition if the intrinsic growth rate of the resource is low or if the size of the economy relative to the biomass of the resource is high then the economy always depletes the natural resource.; Stage two opens the economy from stage one to international trade and institutionalizes property rights over the resource. Stage two further expands the neoclassical growth model to include a service sector that specializes in non-extractive services of the resource. These services are exported and there is trade in the consumption good. Property rights holders make endogenous decisions on the level of property rights enforcement. There exists a unique steady state where the natural resource is preserved and property rights are enforced. The level of enforcement is influenced by the terms of trade. High service prices relative to other prices create an incentive to enforce property rights at a higher level. The economy with institutionalized property rights has higher levels of consumption, production, and welfare than either an economy with open access natural resource or an economy without a natural resource endowment.