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R&D policy in Economies with Endogenous Growth and Non Renewable Resources

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Author Info
Betty Agnani () (Universidad de Granada)
Mª José Gutiérrez (Universidad del País Vasco)
Amaia Iza (Universidad del País Vasco)

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Abstract

The aim of this paper is to analyze how active R&D policies affect the growth rate of an economy with endogenous growth and non-renewable resources. We know from Scholz and Ziemens (1999) and Groth (2006) that in infinitely lived agents (ILA) economies, any active R&D policy increases the growth rate of the economy. To see if this result also appears in economies with finite lifetime agents, we developed an endogenous growth overlapping generations (OLG) economy à la Diamond which uses non-renewable resources as essential inputs in final good’s production. We show analytically that any R&D policy that reduces the use of natural resources implies a raise in the growth rate of the economy. Numerically we show that in economies with low intertemporal elasticity of substitution (IES), active R&D policies lead the economy to increase the depletion of non-renewable resources. Nevertheless, we find that active R&D policies always imply increases in the endogenous growth rate, in both scenarios. Furthermore, when the IES coefficient is lower (greater) than one, active R&D policies affect the growth rate of the economy in the ILA more (less) than in OLG economies.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2008/11.

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Length: 40 pages
Date of creation: 2008
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Handle: RePEc:cea:doctra:e2008_11

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Related research
Keywords: Crecimiento endógeno; I+D; recursos no renovables; sendas de crecimiento; estable; endogenous growth; R&D; non-renewable resources; overlapping generations; infinitely lived agents; balanced growth path.;

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Find related papers by JEL classification:
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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  12. Agnani, Betty & Gutierrez, Maria-Jose & Iza, Amaia, 2005. "Growth in overlapping generation economies with non-renewable resources," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 387-407, September. [Downloadable!] (restricted)
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  13. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
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  16. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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