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Finite Resources and the World Economy

In: NBER International Seminar on Macroeconomics 2021

Author

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  • John Hassler
  • Per Krusell
  • Conny Olovsson

Abstract

We build and evaluate a global macroeconomic model incorporating natural-resource scarcity. The model features low short-run substitutability between the natural resource and other inputs, while in the longer run endogenous directed technical change—allowing the economy to save on scarce resources—generates much higher substitutability, with rather stable cost shares. A nontrivial feature of the framework is secularly increasing resource use: initially, when the resource is abundant, much less is used of it, and as physical and human capital are accumulated, its use increases. The model is also able to generate highly volatile prices at higher frequencies.
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Suggested Citation

  • John Hassler & Per Krusell & Conny Olovsson, 2021. "Finite Resources and the World Economy," NBER Chapters, in: NBER International Seminar on Macroeconomics 2021, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:14597
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    References listed on IDEAS

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    1. Joseph E. Stiglitz, 1974. "Growth with Exhaustible Natural Resources: The Competitive Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 139-152.
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    Cited by:

    1. Per Krusell & Tony Smith, 2022. "Climate Change Around the World," Cowles Foundation Discussion Papers 2342, Cowles Foundation for Research in Economics, Yale University.
    2. Vicknair, David & Tansey, Michael & O'Brien, Thomas E., 2022. "Measuring fossil fuel reserves: A simulation and review of the U.S. Securities and Exchange Commission approach," Resources Policy, Elsevier, vol. 79(C).

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