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Sectoral Heterogeneity, Resource Depletion, and Directed Technical Change: Theory and Policy

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Abstract

We analyze an economy in which sectors are heterogeneous with respect to the intensity of natural resource use. Long-term dynamics are driven by resource prices, sectoral composition, and directed technical change. We study the balanced growth path and determine stability conditions. Technical change is found to be biased towards the resource-intensive sector. Resource taxes have no impact on dynamics except when the tax rate varies over time. Constant research subsidies raise the growth rate while increasing subsidies have the opposite effect. We also find that supporting sectors by providing them with productivity enhancing public goods can raise the growth rate of the economy and additionally provide an effective tool for structural policy.

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Bibliographic 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 08/96.

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Length: 31 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:eth:wpswif:08-96

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Keywords: sustainable development; sectoral heterogeneity; directed technical change;

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  1. Anastasios Xepapadeas, 2001. "Irreversible Deveolpment of a Natural Resource: Management rules and policy issues when direct use values and environmental values are uncertain," Working Papers, University of Crete, Department of Economics 0111, University of Crete, Department of Economics.
  2. Peretto, Pietro F., 2009. "Energy taxes and endogenous technological change," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 269-283, May.
  3. Grimaud, Andre & Rouge, Luc, 2005. "Polluting non-renewable resources, innovation and growth: welfare and environmental policy," Resource and Energy Economics, Elsevier, Elsevier, vol. 27(2), pages 109-129, June.
  4. Di Maria, Corrado & Valente, Simone, 2008. "Hicks meets Hotelling: the direction of technical change in capital–resource economies," Environment and Development Economics, Cambridge University Press, vol. 13(06), pages 691-717, December.
  5. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 1997. "Beyond Balanced Growth," NBER Working Papers 6159, National Bureau of Economic Research, Inc.
  6. Groth, Christian & Schou, Poul, 2007. "Growth and non-renewable resources: The different roles of capital and resource taxes," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 80-98, January.
  7. Smulders, J.A. & Nooij, M. de, 2003. "The impact of energy conservation on technology and economic growth," Open Access publications from Tilburg University urn:nbn:nl:ui:12-123121, Tilburg University.
  8. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  9. Acemoglu, Daron, 2002. "Directed Technical Change," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 69(4), pages 781-809, October.
  10. Lucas Bretschger & Karen Pittel, 2005. "Innovative Investments, Natural Resources and Intergenerational Fairness: Are Pension Funds Good for Sustainable Development?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 141(III), pages 355-376, September.
  11. Christian Scholz & Georg Ziemes, 1999. "Exhaustible Resources, Monopolistic Competition, and Endogenous Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 13(2), pages 169-185, March.
  12. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
  13. Lopez, Ramon E. & Anriquez, Gustavo & Gulati, Sumeet, 2007. "Structural change and sustainable development," Journal of Environmental Economics and Management, Elsevier, vol. 53(3), pages 307-322, May.
  14. Grimaud, Andre & Rouge, Luc, 2003. "Non-renewable resources and growth with vertical innovations: optimum, equilibrium and economic policies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 433-453, March.
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Cited by:
  1. Massimiliano Mazzanti & Roberto Zoboli, 2012. "A Political Economy Approach to Resource Taxation: Weak Sustainability, Revenue Recycling and Regional Planning," Working Papers 201202, University of Ferrara, Department of Economics.
  2. Lopez, Ramon E. & Stocking, Andrew, 2009. "Bringing Growth Theory "Down to Earth"," Working Papers, University of Maryland, Department of Agricultural and Resource Economics 48944, University of Maryland, Department of Agricultural and Resource Economics.

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