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Stochastic technical change, non-renewable resource and optimal sustainable growth

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  • Lafforgue, Gilles

Abstract

We develop a stochastic endogenous growth model involving a non-renewable resource, in which innovation arrivals are governed by a non-stationary Poisson process. Using a CRRA analytical example, we characterize the optimal trajectories of the model and analyze the effects of uncertainty in the sense of Rothschild and Stiglitz by computing a mean-preserving spread. We show that increased variability in the innovation process always implies a smaller optimal R&D effort, since this leads to a reduced marginal rate of return. Effects on the other variables of the model may also be unambiguously identified depending upon the relative risk aversion of agents, the social discount rate and the marginal arrival rate of innovations. Finally, we investigate the conditions under which, on average, the economy reaches a sustainable growth path.

Suggested Citation

  • Lafforgue, Gilles, 2008. "Stochastic technical change, non-renewable resource and optimal sustainable growth," Resource and Energy Economics, Elsevier, vol. 30(4), pages 540-554, December.
  • Handle: RePEc:eee:resene:v:30:y:2008:i:4:p:540-554
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    References listed on IDEAS

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    1. Ayong Le Kama, Alain D., 2001. "Sustainable growth, renewable resources and pollution," Journal of Economic Dynamics and Control, Elsevier, vol. 25(12), pages 1911-1918, December.
    2. Rodrigues, João & Domingos, Tiago & Conceição, Pedro & Belbute, José, 2005. "Constraints on dematerialisation and allocation of natural capital along a sustainable growth path," Ecological Economics, Elsevier, vol. 54(4), pages 382-396, September.
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    6. Grimaud, Andre & Rouge, Luc, 2003. "Non-renewable resources and growth with vertical innovations: optimum, equilibrium and economic policies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 433-453, March.
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    11. Endress, Lee H. & Roumasset, James A. & Zhou, Ting, 2005. "Sustainable growth with environmental spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 58(4), pages 527-547, December.
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    Cited by:

    1. Le, Thanh & Le Van, Cuong, 2016. "Transitional dynamics in an R&D-based growth model with natural resources," Mathematical Social Sciences, Elsevier, vol. 82(C), pages 1-17.
    2. Elettra Agliardi, 2011. "Sustainability in Uncertain Economies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 48(1), pages 71-82, January.
    3. Voosholz, Frauke, 2014. "The influence of different production functions on modeling resource extraction and economic growth," CAWM Discussion Papers 72, University of Münster, Center of Applied Economic Research Münster (CAWM).
    4. Thanh Le & Cuong Le Van, 2014. "Natural Resources, R&D and Economic Growth," Working Papers 2014-112, Department of Research, Ipag Business School.
    5. repec:hal:journl:halshs-01114589 is not listed on IDEAS
    6. Figueroa, Adolfo, 2013. "Economic growth and the environment," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    7. Ludkovski, Michael & Sircar, Ronnie, 2016. "Technology ladders and R&D in dynamic Cournot markets," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 127-151.

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