Natural Resources, R&D and Economic Growth
AbstractThis 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 InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-112.
Length: 23 pages
Date of creation: 25 Feb 2014
Date of revision:
non-renewable resources; renewable resources; R&D-based growth; stagnant growth; vertical innovation.;
Find related papers by JEL classification:
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-15 (All new papers)
- NEP-ENV-2014-03-15 (Environmental Economics)
- NEP-FDG-2014-03-15 (Financial Development & Growth)
- NEP-GRO-2014-03-15 (Economic Growth)
- NEP-INO-2014-03-15 (Innovation)
- NEP-RES-2014-03-15 (Resource Economics)
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