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Sustainability and Substitution of Exhaustible Natural Resources : How Resource Prices Affect Long-Term R&D Investments

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  • Bretschger, L.
  • Smulders, J.A.

    (Tilburg University, Center For Economic Research)

Abstract

Traditional resource economics has been criticised for assuming too high elasticities of substitution, not observing material balance principles and relying too much on planner solutions to obtain long-term growth. By analysing a multi-sector R&Dbased endogenous growth model with exhaustible natural resources, labour, and knowledge capital as inputs, the present paper addresses this critique. We study transitional dynamics and the long-term growth path and identify conditions under which firms keep spending on research and development so that growth is sustained. We demonstrate that long-run growth can be sustained under free market conditions even when elasticities of substitution between man-made inputs and resources are low.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • 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.
    • Handle: RePEc:tiu:tiucen:2ae844f6-5ea5-45d4-963d-1a8d88756a43
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    Cited by:

    1. Simone Valente, 2005. "Genuine dissaving and optimal growth," CER-ETH Economics working paper series 05/38, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. Bretschger, Lucas, 2005. "Economics of technological change and the natural environment: How effective are innovations as a remedy for resource scarcity?," Ecological Economics, Elsevier, vol. 54(2-3), pages 148-163, August.
    3. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
    4. Valente, Simone, 2008. "Intergenerational transfers, lifetime welfare, and resource preservation," Environment and Development Economics, Cambridge University Press, vol. 13(1), pages 53-78, February.
    5. Dagmar Nelissen & Till Requate, 2007. "Pollution-reducing and resource-saving technological progress," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 6(1), pages 5-44.
    6. Wernstedt, Kris & Crooks, Lisa & Hersh, Robert, 2003. "Brownfields Redevelopment in Wisconsin: A Survey of the Field," Discussion Papers 10443, Resources for the Future.
    7. Valente, Simone, 2006. "Trade, Envy and Growth: International Status Seeking in a Two-Country World," MPRA Paper 1095, University Library of Munich, Germany.
    8. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    9. Lucas Bretschger & Simone Valente, 2011. "International trade and net investment: theory and evidence," International Economics and Economic Policy, Springer, vol. 8(2), pages 197-224, June.
    10. Manh Hung Nguyen & Phu Nguyen Van, 2008. "Growth and convergence in a model with renewable and nonrenewable resources," Working Papers 21, Development and Policies Research Center (DEPOCEN), Vietnam.
    11. Jinhee Kwon & Cheong Kim & Kun Chang Lee, 2020. "Moderating Effect of the Continental Factor on the Business Strategy and M&A Performance in the Pharmaceutical Industry for Sustainable International Business," Sustainability, MDPI, vol. 12(12), pages 1-14, June.
    12. Fagnart, Jean-François & Germain, Marc, 2011. "Quantitative versus qualitative growth with recyclable resource," Ecological Economics, Elsevier, vol. 70(5), pages 929-941, March.
    13. Martin Stürmer & Gregor Schwerhoff, 2012. "Non-Renewable but Inexhaustible – Resources in an Endogenous Growth Model," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_09, Max Planck Institute for Research on Collective Goods.
    14. Lucas Bretschger, 2004. "Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable," CER-ETH Economics working paper series 03/29, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    15. Jean-Pierre Amigues & Ngo Van Long & Michel Moreaux, 2004. "Overcoming Natural Resource Constraints Through R&D," CIRANO Working Papers 2004s-14, CIRANO.
    16. Krysiak, Frank C., 2006. "Entropy, limits to growth, and the prospects for weak sustainability," Ecological Economics, Elsevier, vol. 58(1), pages 182-191, June.

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    More about this item

    Keywords

    economic growth; natural resources; investment; incentives; technological change; sustainable development; prices; research and development;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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