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Natural Resources, R&D and Economic Growth

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  • Thanh Le
  • Cuong Le Van

Abstract

This paper studies the long-run economic impact of natural resources by constructing a Schumpeterian endogenous growth model that incorporates an upstream resource intensive sector. Natural resources are extracted, processed and utilized to produce intermediate capital goods which are essential inputs for producing a ffnal consumption good. R&D activities are targeted at improving the quality of existing intermediate products. In this context, we characterize balanced growth paths and examine the issues of sustainability and long-run growth associated with these compet- itive equilibrium solution trajectories. The analysis is conducted through the comparison of the two natural resource types: renewable versus non- renewable and two optimal equilibrium conditions: social versus private. We show that negative growth is possible, however, only applied to an economy that is endowed with non-renewable resources. In addition, we derive conditions under which an economy experiences permanent stag- nant growth. We also show that having a strong innovative sector is essential for escaping this stagnant growth trap. We then identify condi- tions under which growth is larger under renewable resources as compared to their non-renewable counterpart and vice versa.

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Bibliographic Info

Paper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-112.

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Length: 23 pages
Date of creation: 25 Feb 2014
Date of revision:
Handle: RePEc:ipg:wpaper:2014-112

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Related research

Keywords: non-renewable resources; renewable resources; R&D-based growth; stagnant growth; vertical innovation.;

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