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

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  • Groth Christian

    () (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. This corroborates Solow's skepticism.

Suggested Citation

  • Groth Christian, 2004. "Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-15, May.
  • Handle: RePEc:bpj:bejmac:v:topics.4:y:2004:i:1:n:8
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    References listed on IDEAS

    as
    1. Christian Groth & Poul Schou, 2002. "Can non-renewable resources alleviate the knife-edge character of endogenous growth?," Oxford Economic Papers, Oxford University Press, pages 386-411.
    2. 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.
    3. Hideo Suzuki, 1976. "On the Possibility of Steadily Growing per capita Consumption in an Economy with a Wasting and Non-Replenishable Resource," Review of Economic Studies, Oxford University Press, vol. 43(3), pages 527-535.
    4. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
    5. 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.
    6. Poul Schou, 2000. "Polluting Non-Renewable Resources and Growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 211-227.
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    Citations

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    Cited by:

    1. Andre, Francisco J. & Cerda, Emilio, 2005. "On natural resource substitution," Resources Policy, Elsevier, pages 233-246.
    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. Growiec, Jakub & Schumacher, Ingmar, 2008. "On technical change in the elasticities of resource inputs," Resources Policy, Elsevier, pages 210-221.
    4. 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.

    More about this item

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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