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Energy Saving Innovations, Non-Exhaustible Sources of Energy and Long-Run: What Would Happen if we Run Out of Oil?

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  • Hernando Zuleta

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Abstract

We formulate and solve a model of factor saving technological improvement considering three factors of production: labor, capital and energy. The productive activities have three main characteristics: first, in order to use capital goods firms need energy; second, there are two sources of energy: nonexhaustible and exhaustible; third, capital goods can be of different qualities and the quality of these goods can be changed along two dimensions–reducing the need of energy or changing the source of energy used in the production process. The economy goes through three stages of development after industrialization. In the first one, firms make use of exhaustible energy and the efficiency in the use of energy is constant. In the second stage, as the price of energy grows the efficiency in its use is increased. In the third stage, the price of exhaustible sources is so high that firms have incentives to use non-exhaustible sources of energy. During this stage the price of energy is constant. In this set up, the end of the oil age has level effects on consumption and output but it does not cause the collapse of the economic system. ** Se formula y resuelve un modelo de cambio tecnológico ahorrador de factores de producción que considera tres factores: capital, trabajo y energía. El modelo cuenta con características específicas con respecto a la interacción entre la energía (la cual, de acuerdo a su fuente puede ser renovable y no renovable) y el capital. Una vez esta economía se ha definido, se supone que evoluciona en tres etapas luego de su industrialización, durante las cuales el carácter renovable o no renovable de la energía influye su precio relativo, eficiencia y afecta también el nivel agregado de consumo y producción de la economía, sin que esta evolución lleve al colapso del sistema económico.

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Bibliographic Info

Article provided by UNIVERSIDAD DEL ROSARIO in its journal REVISTA DE ECONOMÍA DEL ROSARIO.

Volume (Year): (2008)
Issue (Month): ()
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Handle: RePEc:col:000151:006168

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Geoffrey Heal, 1976. "The Relationship Between Price and Extraction Cost for a Resource with a Backstop Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 371-378, Autumn.
  3. Hernando Zuleta, 2008. "Seasons, savings and GDP," DOCUMENTOS DE TRABAJO 004592, UNIVERSIDAD DEL ROSARIO.
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