Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable
AbstractUsing a dynamic model with non-renewable natural resources and endogenous knowledge creation, the paper analyses economic development under conditions which are generally considered as most unfavourable. We assume poor substitution between primary input factors, positive population growth and a limited supply of materials in the static part of the framework, as well as natural resources being an essential input into R&D, and constant or decreasing returns to innovative activities in the dynamic part. It is shown that there is an inverse relationship between input substitution and growth-enhancing sectoral change and that labour supply supports economic dynamics through the knowledge-creation effect. A permanent increase in living standards is achievable under free market conditions, but adjustment costs and errors in long-term expectations might impede this development.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 03/29.
Length: 23 pages
Date of creation: May 2004
Date of revision:
endogenous technological change; environment; natural resources; sustainability;
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; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-AGR-2005-11-19 (Agricultural Economics)
- NEP-ALL-2005-11-19 (All new papers)
- NEP-ENV-2005-11-19 (Environmental Economics)
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