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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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  1. 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.
  2. repec:att:wimass:9428 is not listed on IDEAS
  3. Christian Groth & Poul Schou, 2002. "Can non-renewable resources alleviate the knife-edge character of endogenous growth?," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 386-411, July.
  4. 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.
  5. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January.
  6. 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.
  7. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
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Cited by:
  1. Growiec, Jakub & Schumacher, Ingmar, 2008. "On technical change in the elasticities of resource inputs," Resources Policy, Elsevier, vol. 33(4), pages 210-221, December.
  2. Stamford da Silva, Alexandre, 2008. "Growth with exhaustible resource and endogenous extraction rate," Economic Modelling, Elsevier, vol. 25(6), pages 1165-1174, November.
  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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