2011 Articles

The Two-sector Economic Problem Of Persistent Organic Pollution and Baltic Sea Salmon Fisheries

Hutniczak, Barbara; Kronbak, Lone Grønbæk

The paper describes the general nature of two-sector environmental and natural resource problems and highlights the issue of two sector models where one sector imposes a one-sided negative externality on the other sector, e.g. the polluting sector causes changes in the economic value of the fishery sector. The paper sets up a general social planner model and demonstrates it in simple functional form, using the problem of persistent organic pollution in the Baltic Sea and its effects on the regulation and economic value of the Baltic Salmon. The paper illustrates how a modified golden rule can be used to describe the optimal link between the two sectors.