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R&D policy in Economies with Endogenous Growth and Non Renewable Resources

  • Betty Agnani

    ()

    (Universidad de Granada)

  • Mª José Gutiérrez

    (Universidad del País Vasco)

  • Amaia Iza

    (Universidad del País Vasco)

The aim of this paper is to analyze how active R&D policies affect the growth rate of an economy with endogenous growth and non-renewable resources. We know from Scholz and Ziemens (1999) and Groth (2006) that in infinitely lived agents (ILA) economies, any active R&D policy increases the growth rate of the economy. To see if this result also appears in economies with finite lifetime agents, we developed an endogenous growth overlapping generations (OLG) economy à la Diamond which uses non-renewable resources as essential inputs in final good’s production. We show analytically that any R&D policy that reduces the use of natural resources implies a raise in the growth rate of the economy. Numerically we show that in economies with low intertemporal elasticity of substitution (IES), active R&D policies lead the economy to increase the depletion of non-renewable resources. Nevertheless, we find that active R&D policies always imply increases in the endogenous growth rate, in both scenarios. Furthermore, when the IES coefficient is lower (greater) than one, active R&D policies affect the growth rate of the economy in the ILA more (less) than in OLG economies.

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Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2008/11.

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Length: 40 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:cea:doctra:e2008_11
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  1. Lucas, Robert Jr. & Stokey, Nancy L., 1984. "Optimal growth with many consumers," Journal of Economic Theory, Elsevier, vol. 32(1), pages 139-171, February.
  2. Robert G. King & Sergio T. Rebelo, 1989. "Transitional Dynamics and Economic Growth in the Neoclassical Model," NBER Working Papers 3185, National Bureau of Economic Research, Inc.
  3. Olson, Lars J. & Knapp, Keith C., 1997. "Exhaustible Resource Allocation in an Overlapping Generations Economy," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 277-292, March.
  4. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
  5. Gutiérrez Huerta, María José & Iza Padilla, María Amaya & Agnani, Betty, 2002. "Growth in Overlapping Generation Economies with Non-Renewable Resources," DFAEII Working Papers 2002-22, University of the Basque Country - Department of Foundations of Economic Analysis II.
  6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
  7. Christian Groth, 2006. "A New-Growth Perspective on Non-Renewable Resources," Discussion Papers 06-26, University of Copenhagen. Department of Economics.
  8. Marla Ripoll & Juan Carlos Cordoba, 2005. "Endogenous TFP and Cross-Country Income Differences," Working Papers 247, University of Pittsburgh, Department of Economics, revised Jan 2005.
  9. Mourmouras, Alex, 1993. "Conservationist government policies and intergenerational equity in an overlapping generations model with renewable resources," Journal of Public Economics, Elsevier, vol. 51(2), pages 249-268, June.
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  11. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  12. Heal, G., 1990. "The Optimal Use Of Exhaustible Resources," Papers fb-_90-10, Columbia - Graduate School of Business.
  13. Gourinchas, Pierre-Olivier & Parker, Jonathan A, 2000. "Consumption Over the Life-Cycle," CEPR Discussion Papers 2345, C.E.P.R. Discussion Papers.
  14. Christian Groth & Poul Schou, 2000. "Can Nonrenewable Resources Alleviate the Knife-edge Character of Endogenous Growth," Discussion Papers 00-02, University of Copenhagen. Department of Economics.
  15. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
  16. Yuan-Hung Hsuku, 2007. "Dynamic consumption and asset allocation with derivative securities," Quantitative Finance, Taylor & Francis Journals, vol. 7(2), pages 137-149.
  17. Solow, Robert M, 1986. " On the Intergenerational Allocation of Natural Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 141-49.
  18. Christian Scholz & Georg Ziemes, 1999. "Exhaustible Resources, Monopolistic Competition, and Endogenous Growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(2), pages 169-185, March.
  19. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
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