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Economics of technological change and the natural environment: how effective are innovations as a remedy for resource scarcity?

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Abstract

The paper aims to substantiate the importance of endogenous innovations when evaluating the compatibility of natural resource use and economic development. It explains that technological change has the potential to compensate for natural resource scarcity, diminishing returns to capital, poor input substitution, and material balance restrictions, but is limited by various restrictions like fading returns to innovative investments and rising research costs. It also shows how innovative activities are fostered by accurate price signals and research-favouring sectoral change. The simultaneous effects of increasing technical knowledge, decreasing resource inputs, and increasing world population largely determine the chances of long-run sustainable development. Consequently, future research has to be directed at a more thorough understanding of the mechanisms driving innovations in the presence of natural resource scarcity.

Suggested Citation

  • 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.
  • Handle: RePEc:eth:wpswif:03-27
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    More about this item

    Keywords

    endogenous technological change; environment; natural resources; sustainability;

    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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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