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Non-renewable resources and growth, the case of the oil: a simple endogenous model

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Author Info
Fabbri, Giorgio
Abstract

We present a growth model in which a non-renewable resource enters in the production function. The non-renewable resource is supposed to be sold by an external monopolistic that maximizes his intertemporal discounted cash flow. This approach allows to endogenize the price of the resource. We use the historical data of the oil price and of the oil production to calibrate the model. The forecasts of the model about the evolution of the GDP growth rate, the price and amount of the production of the oil are described. The formulation of the model is quite easy but it hallows to obtain a good fit with the recent data and especially with the behavior of the three main quantities considered (oil price, oil supply and GDP growth rate) in the last years. Indeed the recent data suggest a new scenario and probably a progressive reduction of the world oil supply (and an indefinite growth of the prices). The model suggests that such a behavior is not due to the imminent physical end of the oil but has a clear economic explanation.

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File URL: http://mpra.ub.uni-muenchen.de/5718/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5718.

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Date of creation: 07 Nov 2007
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Handle: RePEc:pra:mprapa:5718

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Related research
Keywords: Non-renewable resources; Oil; Endogenous Growth;

Find related papers by JEL classification:
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

References listed on IDEAS
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  1. Mitra, Tapan, 1980. "On Optimal Depletion of Exhaustible Resources: Existence and Characterization Results," Econometrica, Econometric Society, vol. 48(6), pages 1431-50, September. [Downloadable!] (restricted)
  2. Neumayer, Eric, 2000. " Scarce or Abundant? The Economics of Natural Resource Availability," Journal of Economic Surveys, Blackwell Publishing, vol. 14(3), pages 307-35, July. [Downloadable!] (restricted)
  3. Kenneth Arrow et al., 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer. [Downloadable!] (restricted)
  4. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Aage, Hans, 1984. "Economic Arguments on the Sufficiency of Natural Resources," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 105-13, March.
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