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Sustainability and substitution of exhaustible natural resources. How resource prices affect long-term R&D-investments

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Author Info
Lucas Bretschger () (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH))
Sjak Smulders () (Tilburg University, Department of Economics)

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Abstract

Traditional resource economics has been criticised for assuming too high elasticities of substitution, not observing material balance principles and relying too much on planner solutions to obtain long-term growth. By analysing a multi-sector R&Dbased endogenous growth model with exhaustible natural resources, labour, and knowledge capital as inputs, the present paper addresses this critique. We study transitional dynamics and the long-term growth path and identify conditions under which firms keep spending on research and development so that growth is sustained. We demonstrate that long-run growth can be sustained under free market conditions even when elasticities of substitution between man-made inputs and resources are low.

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Publisher Info
Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series Economics working paper series with number 03/26.

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Length: 30 pages
Date of creation: Jun 2004
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Handle: RePEc:eth:wpswif:03-26

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Related research
Keywords: Growth non-renewable resources substitution investment incentives endogenous technological change sustainability

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Find related papers by JEL classification:
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August. [Downloadable!] (restricted)
  2. Bovenberg, A.L. & Smulders, S., 1993. "Environmental Quality and Pollution-Saving Technological Change in Two- Sector Endogenous Growth Model," Papers 9321, Tilburg - Center for Economic Research.
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  4. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  5. Bretschger, Lucas, 2001. "How to substitute in order to sustain: knowledge driven growth under environmental restrictions," Environment and Development Economics, Cambridge University Press, vol. 3(04), pages 425-442, April. [Downloadable!]
  6. Charles I. Jones, 1999. "Growth: With or Without Scale Effects?," American Economic Review, American Economic Association, vol. 89(2), pages 139-144, May. [Downloadable!] (restricted)
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  7. Lans Bovenberg, A. & Smulders, Sjak, 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Journal of Public Economics, Elsevier, vol. 57(3), pages 369-391, July. [Downloadable!] (restricted)
  8. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany. [Downloadable!]
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  3. Karen Pittel & Amigues Jean-Pierre & Thomas Kuhn, 2005. "Endogenous growth and recycling : a material balance approach," Economics working paper series 05/37, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  4. Simone Valente, 2006. "Intergenerational Transfers, Lifetime Welfare and Resource Preservation," Economics working paper series 06/55, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  6. Karen Pittel & Dirk T.G. Rübbelke, 2004. "Private Provision of Public Goods : Incentives for Donations," Economics working paper series 04/34, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  7. Simone Valente, 2005. "Genuine Dissaving and Optimal Growth," Others 0505009, EconWPA. [Downloadable!]
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  8. Christoph Heinzel & Ralph Winkler, 2007. "The role of environmental and technology policies in the transition to a low-carbon energy industry," Economics working paper series 07/71, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  10. Lucas Bretschger, 2003. "Economics of technological change and the natural environment: how effective are innovations as a remedy for resource scarcity?," Economics working paper series 03/27, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jun 2004. [Downloadable!]
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  11. Jean-Pierre Amigues & Ngo Van Long & Michel Moreaux, 2004. "Overcoming Natural Resource Constraints Through R&D," CIRANO Working Papers 2004s-14, CIRANO. [Downloadable!]
  12. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007. [Downloadable!]
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  14. Lucas Bretschger, 2004. "Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable," Economics working paper series 03/29, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  15. Hannes Egli, 2005. "A new approach to pollution modelling in models of the environmental Kuznets curve," Economics working paper series 05/39, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  16. Volker Hahn, 2007. "Information Acquisition by Price-Setters and Monetary Policy," Economics working paper series 07/73, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  17. Karen Pittel, 2006. "A Kuznets Curve for Recycling," Economics working paper series 06/52, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  18. Theresa Fahrenberger & Hans Gersbach, 2007. "Legislative Process with Open Rules," Economics working paper series 07/64, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  20. Lucas Bretschger, 2005. "Taxes, Mobile Capital, and Economic Dynamics in a Globalising World," Economics working paper series 05/43, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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