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

Author

Listed:
  • Betty Agnani

    () (Universidad de Granada)

  • Mª José Gutiérrez

    (Universidad del País Vasco)

  • Amaia Iza

    (Universidad del País Vasco)

Abstract

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.

Suggested Citation

  • Betty Agnani & Mª José Gutiérrez & Amaia Iza, 2008. "R&D policy in Economies with Endogenous Growth and Non Renewable Resources," Economic Working Papers at Centro de Estudios Andaluces E2008/11, Centro de Estudios Andaluces.
  • Handle: RePEc:cea:doctra:e2008_11
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    References listed on IDEAS

    as
    1. Christian Scholz & Georg Ziemes, 1999. "Exhaustible Resources, Monopolistic Competition, and Endogenous Growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(2), pages 169-185, March.
    2. Agnani, Betty & Gutierrez, Maria-Jose & Iza, Amaia, 2005. "Growth in overlapping generation economies with non-renewable resources," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 387-407, September.
    3. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
    4. Christian Groth & Poul Schou, 2002. "Can non-renewable resources alleviate the knife-edge character of endogenous growth?," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 386-411, July.
    5. Córdoba, Juan Carlos & Ripoll, Marla, 2008. "Endogenous TFP and cross-country income differences," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1158-1170, September.
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    10. Lucas, Robert Jr. & Stokey, Nancy L., 1984. "Optimal growth with many consumers," Journal of Economic Theory, Elsevier, vol. 32(1), pages 139-171, February.
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    12. 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.
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    16. Christian Groth, 2006. "A New-Growth Perspective on Non-Renewable Resources," Discussion Papers 06-26, University of Copenhagen. Department of Economics.
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    More about this item

    Keywords

    Crecimiento endógeno; I+D; recursos no renovables; sendas de crecimiento; estable; endogenous growth; R&D; non-renewable resources; overlapping generations; infinitely lived agents; balanced growth path.;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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