Non-Renewable but Inexhaustible – Resources in an Endogenous Growth Model
AbstractThis paper proposes an endogenous growth model with an essential non-renewable resource, where economic growth enables firms to invest in innovation in the extraction technology and to allocate more capital to resource extraction. Innovation in the extraction technology offsets the deterioration of ore qualities and keeps the production costs of the non-renewable resource constant. Aggregate output as well as production and use of the non-renewable resource increase exponentially. Our model explains the long-run trends of non-renewable resource prices and world production over more than 200 years. If historical trends in technological progress and in the deterioration of ore qualities continue, it is in the realm of possibility that non-renewable resources are de facto inexhaustible. Our results suggest that the industrialization in China and other emerging economies contributes to keeping non-renewable resource prices constant in the long run.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2012_09.
Date of creation: May 2012
Date of revision:
Non-Renewable Resources; Endogenous Growth; Extraction Technology;
Find related papers by JEL classification:
- O44 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
- Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
- NEP-DGE-2012-05-22 (Dynamic General Equilibrium)
- NEP-ENE-2012-05-22 (Energy Economics)
- NEP-ENV-2012-05-22 (Environmental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Livernois, 2009. "On the Empirical Significance of the Hotelling Rule," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 22-41, Winter.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2009.
"The Environment and Directed Technical Change,"
NBER Working Papers
15451, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2010. "The Environment and Directed Technical Change," Working Papers 2010.93, Fondazione Eni Enrico Mattei.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2010. "The Environment and Directed Technical Change," Seminar Papers 762, Stockholm University, Institute for International Economic Studies.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2011. "The Environment and Directed Technical Change," CEPR Discussion Papers 8660, C.E.P.R. Discussion Papers.
- Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
- Fourgeaud, C. & Lenclud, B. & Michel, Ph., 1982. "Technological renewal of natural resource stocks," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 1-36, November.
- Slade, Margaret E., 1982. "Trends in natural-resource commodity prices: An analysis of the time domain," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 122-137, June.
- Lucas Bretschger & Sjak Smulders, 2003.
"Sustainability and Substitution of Exhaustible Natural Resources. How resource prices affect long-term R&D investments,"
2003.87, Fondazione Eni Enrico Mattei.
- Bretschger, L. & Smulders, J.A., 2003. "Sustainability and Substitution of Exhaustible Natural Resources: How Resource Prices Affect Long-Term R&D Investments," Discussion Paper 2003-71, Tilburg University, Center for Economic Research.
- Lucas Bretschger & Sjak Smulders, 2004. "Sustainability and substitution of exhaustible natural resources. How resource prices affect long-term R&D-investments," CER-ETH Economics working paper series 03/26, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Lasserre, P. & Ouellette, P., 1986.
"On Measuring and Comparing Total Factor Productivities in Extractive and Non Extractive Sectors,"
Cahiers de recherche
8625, Universite de Montreal, Departement de sciences economiques.
- Pierre Lasserre & Pierre Ouellette, 1988. "On Measuring and Comparing Total Factor Productivities in Extractive and Non-extractive Sectors," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 826-34, November.
- Eyal Dvir & Kenneth S. Rogoff, 2009. "Three Epochs of Oil," NBER Working Papers 14927, National Bureau of Economic Research, Inc.
- Tahvonen, Olli & Salo, Seppo, 2001. "Economic growth and transitions between renewable and nonrenewable energy resources," European Economic Review, Elsevier, vol. 45(8), pages 1379-1398, August.
- Lee, Junsoo & List, John A. & Strazicich, Mark C., 2006.
"Non-renewable resource prices: Deterministic or stochastic trends?,"
Journal of Environmental Economics and Management,
Elsevier, vol. 51(3), pages 354-370, May.
- Junsoo Lee & John A. List & Mark Strazicich, 2005. "Nonrenewable Resource Prices: Deterministic or Stochastic Trends?," NBER Working Papers 11487, National Bureau of Economic Research, Inc.
- Junsoo Lee & John A. List & Mark C. Strazicich, 2005. "Nonrenewable Resource Prices: Deterministic or Stochastic Trends?," Working Papers 05-20, Department of Economics, Appalachian State University.
- James D. Hamilton, 2008.
"Understanding Crude Oil Prices,"
NBER Working Papers
14492, National Bureau of Economic Research, Inc.
- Cynthia Lin, C.-Y. & Wagner, Gernot, 2007. "Steady-state growth in a Hotelling model of resource extraction," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 68-83, July.
- Lucas Bretschger & Sjak Smulders, 2007. "Sustainable Resource Use and Economic Dynamics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 36(1), pages 1-13, January.
- Volker Steinbach & Friedrich-W. Wellmer, 2010. "Consumption and Use of Non-Renewable Mineral and Energy Raw Materials from an Economic Geology Point of View," Sustainability, MDPI, Open Access Journal, vol. 2(5), pages 1408-1430, May.
- Nordhaus, William D, 1974. "Resources as a Constraint on Growth," American Economic Review, American Economic Association, vol. 64(2), pages 22-26, May.
- Christian Groth, 2006. "A New-Growth Perspective on Non-Renewable Resources," Discussion Papers 06-26, University of Copenhagen. Department of Economics.
- Grimaud, Andre & Rouge, Luc, 2003. "Non-renewable resources and growth with vertical innovations: optimum, equilibrium and economic policies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 433-453, March.
- Managi, Shunsuke & Opaluch, James J. & Jin, Di & Grigalunas, Thomas A., 2004. "Technological change and depletion in offshore oil and gas," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 388-409, March.
- Pindyck, Robert S., 1998.
"The long-run evolution of energy prices,"
WP 4044-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Martin Stuermer, 2013. "Industrialization and the demand for mineral commodities," Bonn Econ Discussion Papers bgse13_2013, University of Bonn, Germany.
- Bozo Draskovic & Jelena Minovic, 2012. "Determination and Compensation of External Costs in Serbia as Parameter of Sustainable Management," Book Chapters, Institute of Economic Sciences.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marc Martin).
If references are entirely missing, you can add them using this form.