The dynamic behavior of production in the extractive industry

In this article an intrinsically non-linear model in the stock-flow adjustment framework is proposed for describing the dynamic pattern of production behavior of the extractive industry in the United States, where the extractive industry is defined to include four segments of exhaustible resources: metal, coal, oil and gas, and stone and earth minerals. The coefficient of adjustment of the model is assumed to vary over time and is determined by unexpected changes in public policy actions rather than taking on a fixed value independent of time as commonly assumed. The model is estimated from quarterly observations covering the 1962-1984 period by the non-linear least-squares method, and is compared with the constant coefficient of adjustment model estimated by the ordinary least-squares and seemingly unrelated regressions approaches. The empirical findings are of practical importance to the formulation of energy policies.