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Economics of technological change and the natural environment: how effective are innovations as a remedy for resource scarcity?

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Author Info
Lucas Bretschger () (Institute of Economic Research (WIF), Swiss Federal Institute of Technology Zurich (ETH))

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Abstract

The paper aims to substantiate the importance of endogenous innovations when evaluating the compatibility of natural resource use and economic development. It explains that technological change has the potential to compensate for natural resource scarcity, diminishing returns to capital, poor input substitution, and material balance restrictions, but is limited by various restrictions like fading returns to innovative investments and rising research costs. It also shows how innovative activities are fostered by accurate price signals and research-favouring sectoral change. The simultaneous effects of increasing technical knowledge, decreasing resource inputs, and increasing world population largely determine the chances of long-run sustainable development. Consequently, future research has to be directed at a more thorough understanding of the mechanisms driving innovations in the presence of natural resource scarcity.

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Publisher Info
Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 03/27.

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Length: 23 pages
Date of creation: Jun 2003
Date of revision: Jun 2004
Handle: RePEc:eth:wpswif:03-27

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Related research
Keywords: endogenous technological change; environment; natural resources; sustainability;

Other versions of this item:

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. Trajtenberg, M. & Bresnahan, T.F., 1992. "General Purpose Technologies: "Engines of Growth"," Papers 16-92, Tel Aviv.
    Other versions:
  2. Lucas Bretschger, 2004. "Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable," CER-ETH Economics working paper series 03/29, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  3. 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)
  4. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February. [Downloadable!] (restricted)
  5. 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.
  6. Popp, David C., 2001. "The effect of new technology on energy consumption," Resource and Energy Economics, Elsevier, vol. 23(3), pages 215-239, July. [Downloadable!] (restricted)
  7. Lucas Bretschger & Sjak Smulders, 2003. "Sustainability and Substitution of Exhaustible Natural Resources. How resource prices affect long-term R&D investments," Working Papers 2003.87, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  8. Withagen, Cees & B. Asheim, Geir, 1998. "Characterizing sustainability: The converse of Hartwick's rule," Journal of Economic Dynamics and Control, Elsevier, vol. 23(1), pages 159-165, September. [Downloadable!] (restricted)
  9. Carraro, Carlo & Siniscaico, Domenico, 1994. "Environmental policy reconsidered: The role of technological innovation," European Economic Review, Elsevier, vol. 38(3-4), pages 545-554, April. [Downloadable!] (restricted)
  10. Christian Groth & Poul Schou, 2002. "Can non-renewable resources alleviate the knife-edge character of endogenous growth?," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 386-411, July.
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  11. Smulders, S. & Bretschger, L., 2000. "Explaining environmental kuznets curves : how pollution induces policy and new technology," Discussion Paper 95, Tilburg University, Center for Economic Research. [Downloadable!]
  12. Jaffe Adam B. & Stavins Robert N., 1995. "Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S43-S63, November. [Downloadable!] (restricted)
  13. 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.
  14. Elbasha, Elamin H. & Roe, Terry L., 1996. "On Endogenous Growth: The Implications of Environmental Externalities," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 240-268, September. [Downloadable!] (restricted)
  15. Adam B. Jaffe & Richard G. Newell & Robert N. Stavins, 2000. "Technological Change and the Environment," NBER Working Papers 7970, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. van Zon, Adriaan & Yetkiner, I. Hakan, 2003. "An endogenous growth model with embodied energy-saving technical change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 81-103, February. [Downloadable!] (restricted)
  17. 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)
  18. Bretschger, Lucas, 1998. "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, October. [Downloadable!]
  19. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  20. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February. [Downloadable!] (restricted)
  21. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  22. Gerlagh, Reyer & van der Zwaan, Bob, 2003. "Gross world product and consumption in a global warming model with endogenous technological change," Resource and Energy Economics, Elsevier, vol. 25(1), pages 35-57, February. [Downloadable!] (restricted)
Full references

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. GROWIEC, Jakub & SCHUMACHER, Ingmar, 2006. "On technical change in the elasticities of resource inputs," CORE Discussion Papers 2006063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  2. Karen Turner & Nick Hanley & Janine De Fence, 2009. "Do Productivity Improvements Move Us Along the Environmental Kuznets Curve?," Working Papers 09-08, University of Strathclyde Business School, Department of Economics. [Downloadable!]
    Other versions:
  3. Bazhanov, Andrei, 2008. "Sustainable growth in a resource-based economy: the extraction-saving relationship," MPRA Paper 12350, University Library of Munich, Germany. [Downloadable!]
  4. Crespi Francesco & Costantini Valeria, 2007. "Environmental regulation and the export dynamics of energy technologies," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200708, University of Turin. [Downloadable!]
    Other versions:
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