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Sustainability and substitution of exhaustible natural resources

  • Bretschger, Lucas
  • Smulders, Sjak

We study long-run growth in a multi-sector economy with non-renewable resource use and endogenous innovations. Unlike recent capital resource models, we find that poor input substitution need not be detrimental for sustainable growth; on the contrary, combined with resource depletion it fosters structural change, which helps to sustain research investments. We derive the properties of the transition path, show which sectors survive in the long run, and discuss whether the economy approximates a steady state with or without a scale effect. The results continue to hold when some sectors exhibit perfect competition.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 36 (2012)
Issue (Month): 4 ()
Pages: 536-549

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Handle: RePEc:eee:dyncon:v:36:y:2012:i:4:p:536-549
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  8. Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2011. "The Environment and Directed Technical Change," CEPR Discussion Papers 8660, C.E.P.R. Discussion Papers.
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  18. Peretto, P. & Smulders, J.A., 2002. "Technological distance, growth and scale effects," Other publications TiSEM bdce08a7-4ad9-4427-a99e-f, Tilburg University, School of Economics and Management.
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  20. Poul Schou, 2000. "Polluting Non-Renewable Resources and Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 16(2), pages 211-227, June.
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