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Energy Saving Innovations, Non-Exhaustible Sources of Energy and Long-Run: What Would Happen if we Run Out of Oil?

  • Hernando Zuleta


We formulate and solve a model of factor saving technological improvementconsidering three factors of production: labor, capital and energy.The productive activities have three main characteristics: first, in order to usecapital goods firms need energy; second, there are two sources of energy: nonexhaustibleand exhaustible; third, capital goods can be of different qualitiesand the quality of these goods can be changed along two dimensions-reducingthe need of energy or changing the source of energy used in the productionprocess. The economy goes through three stages of development after industrialization.In the first one, firms make use of exhaustible energy and theefficiency in the use of energy is constant. In the second stage, as the price ofenergy grows the efficiency in its use is increased. In the third stage, the price ofexhaustible sources is so high that firms have incentives to use non-exhaustiblesources of energy. During this stage the price of energy is constant. In this setup, the end of the oil age has level effects on consumption and output but itdoes not cause the collapse of the economic system.**Se formula y resuelve un modelo de cambio tecnológico ahorradorde factores de producción que considera tres factores: capital, trabajo yenergía. El modelo cuenta con características específicas con respecto a la interacción entre la energía (la cual, de acuerdo a su fuente puede ser renovabley no renovable) y el capital. Una vez esta economía se ha definido, se suponeque evoluciona en tres etapas luego de su industrialización, durante las cualesel carácter renovable o no renovable de la energía influye su precio relativo,eficiencia y afecta también el nivel agregado de consumo y producción de laeconomía, sin que esta evolución lleve al colapso del sistema económico.

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Volume (Year): (2008)
Issue (Month): (November)

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Handle: RePEc:col:000151:006168
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  1. Boldrin, Michele & Levine, David, 2002. "Factor Saving Innovation," CEPR Discussion Papers 3262, C.E.P.R. Discussion Papers.
  2. Galor, Oded, 2005. "From Stagnation to Growth: Unified Growth Theory," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 4, pages 171-293 Elsevier.
  3. Hernando Zuleta, 2008. "Factor Saving Innovations and Factor Income Shares," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 836-851, October.
  4. 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.
  5. Gary D. Hansen & Edward C. Prescott, 2002. "Malthus to Solow," American Economic Review, American Economic Association, vol. 92(4), pages 1205-1217, September.
  6. Blanchard, Olivier, 1998. "Revisiting European Unemployment : Unemployment, Capital Accumulation and Factor Prices," Research Series, Economic and Social Research Institute (ESRI), number GL28.
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  8. Groth, C. & Schou, P., 2000. "Can Nonrenewable Resources Alleviate the Knife-Edge Character of Endogenous Growth," Papers 00-02, Carleton - School of Public Administration.
  9. Kuper, Gerard H. & van Soest, Daan P., 2003. "Path-dependency and input substitution: implications for energy policy modelling," Energy Economics, Elsevier, vol. 25(4), pages 397-407, July.
  10. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
  11. Thorvaldur Gylfason & Gylfi Zoega, 2006. "Natural Resources and Economic Growth: The Role of Investment," The World Economy, Wiley Blackwell, vol. 29(8), pages 1091-1115, 08.
  12. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  13. Joseph Zeira, 1998. "Workers, Machines, And Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1091-1117, November.
  14. Tahvonen, Olli, 1994. "Carbon dioxide abatement as a differential game," European Journal of Political Economy, Elsevier, vol. 10(4), pages 685-705, December.
  15. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  16. Boucekkine, Raouf & Pommeret, Aude, 2004. "Energy saving technical progress and optimal capital stock: the role of embodiment," Economic Modelling, Elsevier, vol. 21(3), pages 429-444, May.
  17. Smulders, J.A. & de Nooij, M., 2003. "The impact of energy conservation on technology and economic growth," Other publications TiSEM c4db0986-2132-4216-aa53-0, Tilburg University, School of Economics and Management.
  18. Pietro Peretto & John J. Seater, 2006. "Augmentation or Elimination?," DEGIT Conference Papers c011_060, DEGIT, Dynamics, Economic Growth, and International Trade.
  19. Hernando Zuleta, 2008. "Seasons, savings and GDP," DOCUMENTOS DE TRABAJO 004592, UNIVERSIDAD DEL ROSARIO.
  20. Watkins, G.C., 2006. "Oil scarcity: What have the past three decades revealed?," Energy Policy, Elsevier, vol. 34(5), pages 508-514, March.
  21. Hernando Zuleta, 2004. "A Note on Scale Effects," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 237-242, January.
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