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Sustainability and substitution of exhaustible natural resources

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  • Bretschger, Lucas
  • Smulders, Sjak

Abstract

We study long-run growth in a multi-sector economy with non-renewable resource use and endogenous innovations. Unlike recent capital resource models, we find that poor input substitution need not be detrimental for sustainable growth; on the contrary, combined with resource depletion it fosters structural change, which helps to sustain research investments. We derive the properties of the transition path, show which sectors survive in the long run, and discuss whether the economy approximates a steady state with or without a scale effect. The results continue to hold when some sectors exhibit perfect competition.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 4 ()
Pages: 536-549

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:4:p:536-549

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Web page: http://www.elsevier.com/locate/jedc

Related research

Keywords: Growth; Non-renewable resources; Substitution; Investment incentives; Endogenous technological change; Sustainability;

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References

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  1. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May.
  2. Di Maria, Corrado & Valente, Simone, 2008. "Hicks meets Hotelling: the direction of technical change in capital–resource economies," Environment and Development Economics, Cambridge University Press, vol. 13(06), pages 691-717, December.
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  7. Groth, C. & Schou, P., 2000. "Can Nonrenewable Resources Alleviate the Knife-Edge Character of Endogenous Growth," Papers 00-02, Carleton - School of Public Administration.
  8. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-44, June.
  9. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4656, London School of Economics and Political Science, LSE Library.
  10. Karen Pittel & Lucas Bretschger, 2010. "The implications of heterogeneous resource intensities on technical change and growth," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1173-1197, November.
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  13. Grimaud, Andre & Rouge, Luc, 2003. "Non-renewable resources and growth with vertical innovations: optimum, equilibrium and economic policies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 433-453, March.
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  17. Daron Acemoglu, 2001. "Directed Technical Change," NBER Working Papers 8287, National Bureau of Economic Research, Inc.
  18. Christian Scholz & Georg Ziemes, 1999. "Exhaustible Resources, Monopolistic Competition, and Endogenous Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 169-185, March.
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Citations

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Cited by:
  1. Valente, Simone, 2011. "Intergenerational externalities, sustainability and welfare—The ambiguous effect of optimal policies on resource depletion," Resource and Energy Economics, Elsevier, vol. 33(4), pages 995-1014.
  2. Krysiak, Frank C., 2006. "Entropy, limits to growth, and the prospects for weak sustainability," Ecological Economics, Elsevier, vol. 58(1), pages 182-191, June.
  3. Angelo Antoci & Paolo Russu & Serena Sordi & Elisa Ticci, 2012. "The interaction between natural resources- and physical capital-intensive sectors in a behavioral model of economic growth," Department of Economics University of Siena 661, Department of Economics, University of Siena.

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