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Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate

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  • Christian Groth

    (Institute of Economics, University of Copenhagen)

Abstract

Conventional endogenous growth theory relies on the assumption of constant returns to ”broad capital”. As Solow pointed out, the strength of this assumption is revealed by recognizing that even the slightest touch of increasing returns creates explosive growth: infinite output in finite time! But Solow’s observation ignored natural resources. What happens if non-renewable resources enter the ”growth engine”? In this case (strictly) endogenous growth requires the technology to be such that there is no upper bound on the sustainable per capita growth rate.

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Bibliographic Info

Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 03-20.

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Length: 11 pages
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:kud:epruwp:03-20

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Keywords: endogenous growth; semi-endogenous growth; non-renewable resources; knife-edge;

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References

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  1. Christian Groth, 2000. "Can Nonrenewable Resources Alleviate the Knife-edge Character of Endogenous Growth?," Econometric Society World Congress 2000 Contributed Papers 1480, Econometric Society.
  2. William D. Nordhaus, 1992. "Lethal Model 2: The Limits to Growth Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 1-60.
  3. Poul Schou, 2000. "Polluting Non-Renewable Resources and Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(2), pages 211-227, June.
  4. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
  5. Suzuki, Hideo, 1976. "On the Possibility of Steadily Growing per capita Consumption in an Economy with a Wasting and Non-Replenishable Resource," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 527-35, October.
  6. Larry E. Jones & Rodolfo E. Manuelli, 1994. "The Sources of Growth," Macroeconomics 9411002, EconWPA, revised 05 Mar 1999.
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Cited by:
  1. Stamford da Silva, Alexandre, 2008. "Growth with exhaustible resource and endogenous extraction rate," Economic Modelling, Elsevier, vol. 25(6), pages 1165-1174, November.
  2. Jakub, GROWIEC & Ingmar, SCHUMACHER, 2006. "On Technical Change in the Elasticities of Resource Inputs," Discussion Papers (ECON - Département des Sciences Economiques) 2006031, Université catholique de Louvain, Département des Sciences Economiques.
  3. Christian Groth, 2004. "Innovation and growth: What have we learnt from the robustness debate?," Discussion Papers 04-29, University of Copenhagen. Department of Economics, revised Nov 2004.

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