Bety Agnany () (Department of Economic Theory and Economic History, University of Granada.) Maria Jose Gutierrez (DFAEII - The University of the Basque Country) Amaia Iza (DFAEII - The University of the Basque Country)
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The aim of this paper is to analyze how active R&D policies affect the growth rate of an economy with endogenous growth and non-renewable resources. We know from Scholz and Ziemens (1999) and Groth (2006) that in infinitely lived agents (ILA) economies, any active R&D policy increases the growth rate of the economy. To see if this result also appears in economies with finite lifetime agents, we developed an endogenous growth overlapping generations (OLG) economy à la Diamond which uses non-renewable resources as essential inputs in final good’s production. We show analytically that a sufficient condition guaranteeing that an active R&D policy increases the growth rate of the economy actually implies a reduction of the use of the non-renewable resources. Numerically we show that in economies with low intertemporal elasticity of substitution (IES), active R&D policies lead the economy to increase the depletion of non-renewable resources. Nevertheless, we find that active R&D policies always imply increases in the endogenous growth rate, in both scenarios. Furthermore, when the IES coefficient is lower (greater) than one, active R&D policies affect the growth rate of the economy in the ILA more (less) than in OLG economies.
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Paper provided by Department of Economic Theory and Economic History of the University of Granada. in its series ThE Papers with number
07/09.
Find related papers by JEL classification: O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
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