The Direction of Technical Change in Capital-Resource Economies

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The Direction of Technical Change in Capital-Resource Economies

Author Info

Corrado Di Maria () (CentER, Tilburg University)
Simone Valente () (Center of Economic Research, Swiss Federal Institute of Technology Zurich (ETH))

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Simone Valente

Abstract

We analyze a multi-sector growth model with directed technical change where man-made capital and exhaustible resources are essen- tial for production. The relative profitability of factor-specific inno- vations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that convergence to bal- anced growth implies zero capital-augmenting innovations: in the long run, the economy exhibits purely resource-augmenting technical change. This result provides sound microfoundations for the broad class of models of exogenous/endogenous growth where resource-aug- menting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.

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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 06/50.

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Length: 26 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:eth:wpswif:06-50

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Paper
- Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany. [Downloadable!]

Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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-AGR-2006-09-11 (Agricultural Economics)
NEP-ALL-2006-09-11 (All new papers)
NEP-CSE-2006-09-11 (Economics of Strategic Management)
NEP-DEV-2006-09-11 (Development)
NEP-DGE-2006-09-11 (Dynamic General Equilibrium)
NEP-ENE-2006-09-11 (Energy Economics)
NEP-ENV-2006-09-11 (Environmental Economics)

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