R&D Policy in Economies with Endogenous Growth and Non-Renewable Resources
AbstractThe 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 Ã la Diamond which uses non-renewable resources as essential inputs in final goodâ€™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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Bibliographic InfoPaper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2007-05.
Date of creation: Oct 2007
Date of revision:
Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
Other versions of this item:
- Betty Agnani & Mª José Gutiérrez & Amaia Iza, 2008. "R&D policy in Economies with Endogenous Growth and Non Renewable Resources," Economic Working Papers at Centro de Estudios Andaluces E2008/11, Centro de Estudios Andaluces.
- Bety Agnany & Maria Jose Gutierrez & Amaia Iza, 2007. "R&D Policy in Economies with Endogenous Growth and Non-Renewable Resources," ThE Papers 07/09, Department of Economic Theory and Economic History of the University of Granada..
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-11-24 (All new papers)
- NEP-DGE-2007-11-24 (Dynamic General Equilibrium)
- NEP-ENV-2007-11-24 (Environmental Economics)
- NEP-MIC-2007-11-24 (Microeconomics)
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