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The Inada Conditions for Material Resource Inputs Reconsidered

  • Stefan baumgärtner

It is shown that the thermodynamic law of conservation of mass, the so-called Materials-Balance-Principle, implies that the marginal product as well as the average product of a material resource input are bounded from above. This means that the Inada conditions, one of the standard assumptions of economic growth theory, when applied to material resource inputs are inconsistent with a basic law of nature. The analysis is based on a model of multi-level production where intermediate goods are produced from elementary resources, and an all-purpose final commodity is produced from these intermediates. Copyright Kluwer Academic Publishers 2004

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Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 29 (2004)
Issue (Month): 3 (November)
Pages: 307-322

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Handle: RePEc:kap:enreec:v:29:y:2004:i:3:p:307-322
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  1. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
  2. Barelli, Paulo & Pessoa, Samuel de Abreu, 2003. "Inada conditions imply that production function must be asymptotically Cobb-Douglas," Economics Working Papers (Ensaios Economicos da EPGE) 477, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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  8. M. Hoel, 1977. "Resource Extraction and Recycling With Environmental Costs," Working papers 197, Massachusetts Institute of Technology (MIT), Department of Economics.
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