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Energy Costs, Endogenous Innovation, and Long-run Growth / Energiekosten, endogener technischer Fortschritt und Wirtschaftswachstum

Author

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  • Welsch Heinz

    (Department of Economics, Universität Oldenburg, D-26111 Oldenburg. Phone.: ++49/+4 41/7 98 4112)

  • Eisenack Klaus

    (Potsdam Institute for Climate Impact Research, D-14412 Potsdam. Phone: Η—1-49/+3 31/2 88 2625)

Abstract

Based on the observation that energy costs have been decreasing over much of the 20th century, this paper extends the Romer (1990) model of endogenous technological change to examine the impact of secular changes in energy costs on technological progress and long-run growth. The key finding is that decreasing energy costs, while unambiguously increasing the rate of growth of output, enhance or reduce the rate of technological progress depending on the representative household's elasticity of marginal utility. A calibration exercise shows that even if technological progress is actually neither enhanced nor reduced, the endogenous innovation model of growth predicts a substantially stronger effect of energy costs on growth than the neoclassical model.

Suggested Citation

  • Welsch Heinz & Eisenack Klaus, 2002. "Energy Costs, Endogenous Innovation, and Long-run Growth / Energiekosten, endogener technischer Fortschritt und Wirtschaftswachstum," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(4), pages 490-499, August.
    • Handle: RePEc:jns:jbstat:v:222:y:2002:i:4:p:490-499
    DOI: 10.1515/jbnst-2002-0406
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    References listed on IDEAS

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