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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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Article provided by UNIVERSIDAD DEL ROSARIO in its journal REVISTA DE ECONOMÍA DEL ROSARIO.

Volume (Year): (2008)
Issue (Month): ()
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Handle: RePEc:col:000151:006168
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  1. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
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  3. Thorvaldur Gylfason & Gylfi Zoega, 2001. "Natural Resources and Economic Growth: The Role of Investment," EPRU Working Paper Series 01-02, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  4. Boldrin, Michele & Levine, David K., 2002. "Factor Saving Innovation," Journal of Economic Theory, Elsevier, vol. 105(1), pages 18-41, July.
  5. 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.
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  12. Michele Boldrin & David K. Levine, 2002. "Perfectly competitive innovation," Staff Report 303, Federal Reserve Bank of Minneapolis.
  13. 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.
  14. Watkins, G.C., 2006. "Oil scarcity: What have the past three decades revealed?," Energy Policy, Elsevier, vol. 34(5), pages 508-514, March.
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  21. Hernando Zuleta, 2008. "Seasons, savings and GDP," DOCUMENTOS DE TRABAJO 004592, UNIVERSIDAD DEL ROSARIO.
  22. 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.
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