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Non-renewable resources, extraction technology, and endogenous growth

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  • Gregor Schwerhoff
  • Martin Stuermer

Abstract

We document that global resource extraction has strongly increased with economic growth, while prices have exhibited stable trends for almost all major non-renewable resources from 1700 to 2018. Why have resources not become scarcer as suggested by standard economic theory? We develop a theory of extraction technology, geology and growth grounded in stylized facts. Rising resource demand incentivises firms to invest in new technology to increase their economically extractable reserves. Prices remain constant because increasing returns from the geological distribution of resources offset diminishing returns in innovation. As a result, the aggregate growth rate depends partly on the geological distribution of resources. For example, a greater average concentration of a resource in the Earth's crust leads to more resource extraction, a lower price and a higher growth rate on the balanced growth path. Our paper provides economic and geologic microfoundations explaining why flat resource prices and increasing production are reasonable assumptions in economic models of climate change.

Suggested Citation

  • Gregor Schwerhoff & Martin Stuermer, 2015. "Non-renewable resources, extraction technology, and endogenous growth," Working Papers 1506, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:1506
    DOI: 10.24149/wp1506r1
    Note: Revision of WP 1506, first published in December 2015.
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    2. Laurence Kotlikoff & Felix Kubler & Andrey Polbin & Jeffrey Sachs & Simon Scheidegger, 2021. "Making Carbon Taxation A Generational Win Win," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 3-46, February.
    3. Jeannine Bailliu & Doga Bilgin & Kun Mo & Kurt Niquidet & Benjamin Sawatzky, 2019. "Global Commodity Markets and Rebalancing in China: The Case of Copper," Discussion Papers 2019-3, Bank of Canada.
    4. John Baffes & Alain Kabundi & Peter Nagle, 2022. "The role of income and substitution in commodity demand [Modelling OECD industrial energy demand: asymmetric price responses and energy-saving technical change]," Oxford Economic Papers, Oxford University Press, vol. 74(2), pages 498-522.
    5. Meier, Felix D. & Quaas, Martin F., 2021. "Booming gas – A theory of endogenous technological change in resource extraction," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    6. Peichen Ye & Anna Tur & Yilun Wu, 2025. "Non-Renewable Resource Extraction Model with Uncertainties," Games, MDPI, vol. 16(5), pages 1-23, October.
    7. Fortune Ganda, 2024. "Investigating the Relationship and Impact of Environmental Governance, Green Goods, Non-Green Goods and Eco-Innovation on Material Footprint and Renewable Energy in the BRICS Group," Sustainability, MDPI, vol. 16(4), pages 1-20, February.
    8. Lukas Boer & Andrea Pescatori & Martin Stuermer, 2021. "Energy Transition Metals," Discussion Papers of DIW Berlin 1976, DIW Berlin, German Institute for Economic Research.
    9. Addison, Tony & Ghoshray, Atanu, 2023. "Discerning trends in international metal prices in the presence of nonstationary volatility," Resource and Energy Economics, Elsevier, vol. 71(C).
    10. Han, Sun & Zhenghao, Meng & Meilin, Li & Xiaohui, Yang & Xiaoxue, Wang, 2023. "Global supply sustainability assessment of critical metals for clean energy technology," Resources Policy, Elsevier, vol. 85(PB).
    11. Mr. Cian Allen & Camila Casas & Mr. Giovanni Ganelli & Luciana Juvenal & Mr. Daniel Leigh & Mr. Pau Rabanal & Cyril Rebillard & Jair Rodriguez & João Tovar Jalles, 2023. "2022 Update of the External Balance Assessment Methodology," IMF Working Papers 2023/047, International Monetary Fund.
    12. Friedrich-W. Wellmer, 2022. "What we have learned from the past and how we should look forward," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 35(3), pages 765-795, December.
    13. José-Luis Cruz & Esteban Rossi-Hansberg, 2024. "The Economic Geography of Global Warming," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(2), pages 899-939.
    14. Jacks, David S. & Stuermer, Martin, 2020. "What drives commodity price booms and busts?," Energy Economics, Elsevier, vol. 85(C).
    15. Zhenghao Meng & Han Sun & Simeng Song & Yannan Ding & Jinhua Cheng & Chenxi Liu & Lu Chen, 2025. "A study on the impact of technological innovation on the sustainability of critical mineral supply from a multidimensional perspective: a case study of cobalt," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 38(3), pages 493-511, September.
    16. Piyali Kumar & Soumyendra Kishore Datta, 2025. "Ecological Degradation, Climate Change and Economic Growth: A Simultaneous Modeling Analysis of Central European Countries," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 23(3), pages 949-978, September.
    17. Martin Stuermer, 2022. "Non-renewable resource extraction over the long term: empirical evidence from global copper production," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 35(3), pages 617-625, December.
    18. Martin Stuermer & Maxwell Fleming & Ian Lange & Sayeh Shojaeinia, 2023. "Growth and Resources in Space: Pushing the Final Frontier?," Working Papers 2023-02, Colorado School of Mines, Division of Economics and Business.
    19. Rausser, Gordon & Stuermer, Martin, 2020. "A Dynamic Analysis of Collusive Action: The Case of the World Copper Market, 1882-2016," MPRA Paper 104708, University Library of Munich, Germany.
    20. Wang, Qiao & Balvers, Ronald, 2021. "Determinants and predictability of commodity producer returns," Journal of Banking & Finance, Elsevier, vol. 133(C).

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    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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