Natural resource scarcity and long-run development: central mechanisms when conditions are seemingly unfavourable
Using a dynamic model with non-renewable natural resources and endogenous knowledge creation, the paper analyses economic development under conditions which are generally considered as most unfavourable. We assume poor substitution between primary input factors, positive population growth and a limited supply of materials in the static part of the framework, as well as natural resources being an essential input into R&D, and constant or decreasing returns to innovative activities in the dynamic part. It is shown that there is an inverse relationship between input substitution and growth-enhancing sectoral change and that labour supply supports economic dynamics through the knowledge-creation effect. A permanent increase in living standards is achievable under free market conditions, but adjustment costs and errors in long-term expectations might impede this development.
|Date of creation:||May 2004|
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Other publications TiSEM
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00-02, University of Copenhagen. Department of Economics.
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103, Massachusetts Institute of Technology (MIT), Department of Economics.
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- 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.
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"Endogenous Technological Change,"
Levine's Working Paper Archive
2135, David K. Levine.
- 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.
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