Transboundary Renewable Resource and International Trade

We develop a two-country, two-good model with a transboundary renewable resource. A transboundary renewable resource is an open-access resource that is shared by two countries. We characterize the autarkic steady state, then examine the patterns of trade and the post-trading steady-state utility levels. Although the resource stock is reduced by trade, both countries may still benefit from trade when they are specialized in production. We also show that the steady-state utility of a resource good importing country may be reduced by trade, even if it specializes in production of a non-resource good which we refer to as manufactures.