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Exhaustible Resources, Monopolistic Competition, and Endogenous Growth

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  • Christian Scholz
  • Georg Ziemes
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    Abstract

    One of the central analytical findings of the growth literature is that continuous growth is possible even in an economy with exhaustible resources. Based on this result, this paper addresses the question of whether different equilibrium trajectories which lead to a balanced growth path are possible within an endogenous growth model with incomplete competition. Although the Solow-Stiglitz condition is violated due to a monopolistic sector, we nevertheless demonstrate that steady growth in per capita consumption is possible under the condition that the rate of entry of new monopolists exceeds that of the average monopolist's decline in output. As a necessary but not sufficient condition for indeterminacies in a growing economy, this paper demonstrates that the partial production elasticity of capital must be smaller than that of the exhaustible resource. Copyright Kluwer Academic Publishers 1999

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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 13 (1999)
    Issue (Month): 2 (March)
    Pages: 169-185

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    Handle: RePEc:kap:enreec:v:13:y:1999:i:2:p:169-185

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: endogenous growth; exhaustible resources; indeterminacies of growth paths; monopolistic competition;

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    1. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S71-102, October.
    2. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers, Yale - Economic Growth Center 640, Yale - Economic Growth Center.
    3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 323-51, March.
    4. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
    5. Benhabib, Jess & Gali, Jordi, 1995. "On Growth and Indeterminacy: Some Theory and Evidence," Working Papers, C.V. Starr Center for Applied Economics, New York University 95-08, C.V. Starr Center for Applied Economics, New York University.
    6. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 195-232.
    7. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
    8. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
    9. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
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