Shadow prices and production inefficiency of mineral resources

With the Millennium Development Goal focusing on the eradication of poverty in developing countries expiring in 2015, the international focus is shifting toward sustainable development. The sustainability of the natural resources that are used as energy sources and in the production of goods is a global issue that is not specific to developing nations. We contribute to the need for quantitative targets for natural resources by calculating the shadow prices and production inefficiency levels of 32 mineral resources by using a stochastic frontier analysis and panel data from 1980 to 2010 in 162 countries. In addition, we provide estimated shadow prices and production inefficiency levels up to 2020 with various levels of production restrictions. The results show the following: (1) The shadow prices and production inefficiency levels of major metals are generally higher in Asian countries than in non-Asian countries; (2) there is an upward trend in the inefficiency levels in Asian countries, whereas the inefficiency levels remain rather stable in non-Asian countries; (3) production restrictions do not guarantee an increase in shadow prices, but the magnitude of the impact of such restrictions seems to be larger in Asian countries compared to non-Asian countries; (4) production restrictions do not seem to affect production inefficiency; thus, they may not be effective in reducing gaps in production inefficiency between Asian and non-Asian countries.