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Biased Technological Change and the Relative Abundance of Natural Resources

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  • John Boyce

    (University of Calgary)

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    Abstract

    This paper documents that natural resources that are more abundant have higher production, lower prices, higher primary industry revenues, and higher R&D. These empirical facts are explained by a model of biased technological change in which relatively more abundant resources attract greater R&D because the return from obtaining a patent is higher in larger markets. Resource specifi c R&D may be targeted either towards upstream extraction technologies or towards downstream production technologies, and R&D is subject to diminishing knowledge spillovers and diminishing productivity of labor. The estimated elasticity of substitution between natural resources is greater than one, implying that natural resources are substitutes in production. Declining real resource prices in the face of rising resource production are explained by the increasing productivity of labor as knowledge stocks grow.

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    File URL: http://econ.ucalgary.ca/sites/econ.ucalgary.ca.manageprofile/files/unitis/publications/1-4042733/Induced_Innovation_Paper_January_2013.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, University of Calgary in its series Working Papers with number 2013-04.

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    Date of creation: 21 Jan 2013
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    Handle: RePEc:clg:wpaper:2013-04

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    1. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings, Econometric Society 327, Econometric Society.
    2. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 113(4), pages 1055-1089, November.
    3. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2009. "The Environment and Directed Technical Change," NBER Working Papers 15451, National Bureau of Economic Research, Inc.
    4. CHAKRAVORTY Ujjayant & MOREAUX Michel & TIDBALL Mabel, 2006. "Ordering the Extraction of Polluting Nonrenewable Resources," LERNA Working Papers, LERNA, University of Toulouse 06.19.212, LERNA, University of Toulouse.
    5. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999. "The Induced Innovation Hypothesis And Energy-Saving Technological Change," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(3), pages 941-975, August.
    6. Slade, Margaret E., 1982. "Trends in natural-resource commodity prices: An analysis of the time domain," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 122-137, June.
    7. Pindyck, Robert S & Rotemberg, Julio J, 1990. "The Excess Co-movement of Commodity Prices," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(403), pages 1173-89, December.
    8. Junsoo Lee & John A. List & Mark Strazicich, 2005. "Nonrenewable Resource Prices: Deterministic or Stochastic Trends?," NBER Working Papers 11487, National Bureau of Economic Research, Inc.
    9. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
    10. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 160-180, March.
    11. Chakravorty, Ujjayant & Roumasset, James & Tse, Kinping, 1997. "Endogenous Substitution among Energy Resources and Global Warming," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1201-34, December.
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