On Technical Change in the Elasticities of Resource Inputs
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.
|Date of creation:||01 Jun 2006|
|Contact details of provider:|| Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10473945
Web page: http://www.uclouvain.be/econ
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. M. Solow, 1974.
"Intergenerational Equity and Exhaustible Resources,"
Review of Economic Studies,
Oxford University Press, vol. 41(5), pages 29-45.
- R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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.
- 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.
- Christian Groth, 2000. "Can Nonrenewable Resources Alleviate the Knife-edge Character of Endogenous Growth?," Econometric Society World Congress 2000 Contributed Papers 1480, Econometric Society.
- Groth, C. & Schou, P., 2000. "Can Nonrenewable Resources Alleviate the Knife-Edge Character of Endogenous Growth," Papers 00-02, Carleton - School of Public Administration.
- 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.
- AMIGUES Jean-Pierre & MOREAUX Michel & RICCI Francesco, 2006. "Overcoming the Natural Resource Constraint Through Dedicated R&D Effort with Heterogenous Labor Supply," LERNA Working Papers 06.22.215, LERNA, University of Toulouse.
- Jean-Pierre Amigues & Michel Moreaux & Francesco Ricci, 2006. "Overcoming the natural resource constraint through dedicated R&D effort with heterogenous labor supply," THEMA Working Papers 2006-16, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics,in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880 Elsevier.
- Heal, G., 1990. "The Optimal Use Of Exhaustible Resources," Papers fb-_90-10, Columbia - Graduate School of Business.
- Miyagiwa, Kaz & Papageorgiou, Chris, 2007. "Endogenous aggregate elasticity of substitution," Journal of Economic Dynamics and Control, Elsevier, vol. 31(9), pages 2899-2919, September.
- Chris Papageorgiou & Kaz Miyagiwa, 2006. "Endogenous Aggregate Elasticity of Substitution," Departmental Working Papers 2006-06, Department of Economics, Louisiana State University.
- Kaz Miyagiwa & Chris Papageorgiou, 2007. "Endogenous Aggregate Elasticity of Substitution," Emory Economics 0707, Department of Economics, Emory University (Atlanta).
- Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
- Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
- Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
- Grimaud, Andre & Rouge, Luc, 2005. "Polluting non-renewable resources, innovation and growth: welfare and environmental policy," Resource and Energy Economics, Elsevier, vol. 27(2), pages 109-129, June.
- Grimaud, André & Rougé, Luc, 2003. "Polluting Non-Renewable Resources, Innovation and Growth : Welfare and Environmental Policy," IDEI Working Papers 206, Institut d'Économie Industrielle (IDEI), Toulouse.
- Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03.
- Daron Acemoglu, 2000. "Labor- and Capital- Augmenting Technical Change," NBER Working Papers 7544, National Bureau of Economic Research, Inc.
- Yuhn, Ky-hyang, 1991. "Economic Growth, Technical Change Biases, and the Elasticity of Substitution: A Test of the De La Grandville Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 340-346, May.
- de La Grandville, Olivier, 1989. "In Quest of the Slutsky Diamond," American Economic Review, American Economic Association, vol. 79(3), pages 468-481, June.
- Andre, Francisco J. & Cerda, Emilio, 2005. "On natural resource substitution," Resources Policy, Elsevier, vol. 30(4), pages 233-246, December.
- Francisco J. André & Emilio Cerdá, 2004. "On natural resource substitution," Economic Working Papers at Centro de Estudios Andaluces E2004/48, Centro de Estudios Andaluces.
- Groth Christian, 2004. "Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-15, May.
- Christian Groth, 2003. "Strictly Endogenous Growth with Non-renewable Resources Implies an Unbounded Growth Rate," EPRU Working Paper Series 03-20, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 41-56, March.
- Growiec, Jakub & Schumacher, Ingmar, 2008. "On technical change in the elasticities of resource inputs," Resources Policy, Elsevier, vol. 33(4), pages 210-221, December.
- GROWIEC, Jakub & SCHUMACHER, Ingmar, 2006. "On technical change in the elasticities of resource inputs," CORE Discussion Papers 2006063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
- Bretschger, Lucas, 2005. "Economics of technological change and the natural environment: How effective are innovations as a remedy for resource scarcity?," Ecological Economics, Elsevier, vol. 54(2-3), pages 148-163, August.
- Lucas Bretschger, 2003. "Economics of technological change and the natural environment: how effective are innovations as a remedy for resource scarcity?," CER-ETH Economics working paper series 03/27, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jun 2004.
- de La Grandville, Olivier, 1989. "Erratum [In Quest of the Slutsky Diamond]," American Economic Review, American Economic Association, vol. 79(5), pages 1307-1307, December.
- Cleveland, Cutler J. & Ruth, Matthias, 1997. "When, where, and by how much do biophysical limits constrain the economic process?: A survey of Nicholas Georgescu-Roegen's contribution to ecological economics," Ecological Economics, Elsevier, vol. 22(3), pages 203-223, September.
- Poul Schou, 2000. "Polluting Non-Renewable Resources and Growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 16(2), pages 211-227, June. Full references (including those not matched with items on IDEAS)