Seminar Papers, Institute for International Economic Studies, Stockholm University
The Real Real Price of Nonrenewable Resources: Copper 1870-2000
() and John Tilton
Abstract: Over the past 40 years economists have devoted
considerable effort to estimating long-run trends in real commodity prices.
The results indicate that the real prices for many commodities have fallen,
suggesting to the surprise of many that resource scarcity is declining over
time. Almost all of this work, however, uses the U.S. producer price index
or other standard price deflators, which recent research shows overestimate
inflation for several reasons. This article examines copper prices with
adjusted deflators designed to eliminate this bias. It finds that the trend
over time, which is significantly downward when no adjustment is made to
the deflator, displays no tendency in either direction or is significantly
upward depending on the magnitude of the deflator adjustment employed.
These findings suggest that real resource prices provide less support than
widely assumed for the hypothesis that resources are becoming more
available or less scarce over time.
Keywords: resources; copper; real price; inflation bias; scarcity; (follow links to similar papers)
JEL-Codes: C30; F10; O13; Q30; (follow links to similar papers)
33 pages, July 17, 2003
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