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On Technical Change in the Elasticities of Resource Inputs

Author

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  • Jakub, GROWIEC

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))

  • Ingmar, SCHUMACHER

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))

Abstract

This article considers an economy whose production function takes both renewable and non-renewable resources as inputs. We extend the current literature by allowing for exogneous technical change in the elasticity of subsstitution between these two types of resources. In addition, we study the consequences of biased technical change which alters the resources’ relative productivities. We derive long-run asymptotic results, which we use to compare several cases. In the benchmark case of no technical change, our results are close to those obtained by Dasgupta and Heal (1974). In the case of technical change helps obtain positive long-run production despite the depletion of non-renewable resources. In the biased technical change case, long-run production is only possible either if non-renewable resources are non-essential or if biased technical change is quick enough to compensate for the decreasing flow of non-renewable resources. We embed our production function in an optimal model and study its dynamics. As a steady state (or a balanced growth path) is only attainable as time goes to infinity, we resort to numerical simulations to convey what is happening during the short and medium run. Our results provide new considerations for the debate on natural resources. We suggest that technical change should be directed to the resource which is most important for production.

Suggested Citation

  • Jakub, GROWIEC & Ingmar, SCHUMACHER, 2006. "On Technical Change in the Elasticities of Resource Inputs," Discussion Papers (ECON - Département des Sciences Economiques) 2006031, Université catholique de Louvain, Département des Sciences Economiques.
    • Handle: RePEc:ctl:louvec:2006031
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    References listed on IDEAS

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    Cited by:

    1. Alexander S. Skorobogatov, 2016. "Spatial Equilibrium Approach to the Analysis of Income Differentials Across Russian Cities," HSE Working papers WP BRP 149/EC/2016, National Research University Higher School of Economics.
    2. Pittel, Karen & Röpke, Luise, 2014. "The Implications of Energy Input Flexibility for a Resource Dependent Economy," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100321, Verein für Socialpolitik / German Economic Association.
    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. Jouvet, Pierre-André & Schumacher, Ingmar, 2012. "Learning-by-doing and the costs of a backstop for energy transition and sustainability," Ecological Economics, Elsevier, vol. 73(C), pages 122-132.
    5. Growiec, Jakub & Schumacher, Ingmar, 2008. "On technical change in the elasticities of resource inputs," Resources Policy, Elsevier, vol. 33(4), pages 210-221, December.
    6. Jean-François Fagnart & Marc Germain, 2015. "Can the Energy Transition Be Smooth?," Working Papers 2015.04, FAERE - French Association of Environmental and Resource Economists.
    7. Nguyen, Manh-Hung & Nguyen-Van, Phu, 2010. "Growth and convergence in a model with renewable and non-renewable resources: existence, transitional dynamics, and empirical evidence," TSE Working Papers 10-210, Toulouse School of Economics (TSE).

    More about this item

    Keywords

    Elasticity of substitution; Technical change; Biased technical change; Non-renewable resources; Renewable resources;

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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