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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)

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
Date of revision:
Handle: RePEc:cea:doctra:e2008_11

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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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References

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  1. Mourmouras, Alex, 1993. "Conservationist government policies and intergenerational equity in an overlapping generations model with renewable resources," Journal of Public Economics, Elsevier, Elsevier, vol. 51(2), pages 249-268, June.
  2. 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.
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  14. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
  15. Olson, Lars J. & Knapp, Keith C., 1997. "Exhaustible Resource Allocation in an Overlapping Generations Economy," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 277-292, March.
  16. Solow, Robert M, 1986. " On the Intergenerational Allocation of Natural Resources," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 88(1), pages 141-49.
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