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Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate

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  • Groth Christian

    ()
    (University of Copenhagen)

Abstract

Conventional endogenous growth theory relies on the assumption of constant returns to "broad capital". As Solow pointed out, the strength of this assumption is revealed by recognizing that even the slightest touch of increasing returns creates explosive growth: infinite output in finite time! But Solow's observation ignored natural resources. What happens if non-renewable resources enter the "growth engine"? In this case (strictly) endogenous growth requires the technology to be such that there is no upper bound on the sustainable per capita growth rate. This corroborates Solow's skepticism.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 4 (2004)
Issue (Month): 1 (May)
Pages: 1-15

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Handle: RePEc:bpj:bejmac:v:topics.4:y:2004:i:1:n:8

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  1. Christian Groth, 2000. "Can Nonrenewable Resources Alleviate the Knife-edge Character of Endogenous Growth?," Econometric Society World Congress 2000 Contributed Papers 1480, Econometric Society.
  2. Larry E. Jones & Rodolfo E. Manuelli, 1994. "The Sources of Growth," GE, Growth, Math methods 9410002, EconWPA, revised 05 Mar 1999.
  3. William D. Nordhaus, 1992. "Lethal Model 2: The Limits to Growth Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 1-60.
  4. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
  5. Poul Schou, 2000. "Polluting Non-Renewable Resources and Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(2), pages 211-227, June.
  6. Suzuki, Hideo, 1976. "On the Possibility of Steadily Growing per capita Consumption in an Economy with a Wasting and Non-Replenishable Resource," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 527-35, October.
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Cited by:
  1. Christian Groth, 2004. "Innovation and growth: What have we learnt from the robustness debate?," Discussion Papers 04-29, University of Copenhagen. Department of Economics, revised Nov 2004.
  2. Stamford da Silva, Alexandre, 2008. "Growth with exhaustible resource and endogenous extraction rate," Economic Modelling, Elsevier, vol. 25(6), pages 1165-1174, November.

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