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The Direction of Technical Change in Capital-Resource Economies

  • Di Maria, Corrado
  • Valente, Simone

We analyze a multi-sector growth model with directed technical change where man-made capital and exhaustible resources are essential for production. The relative profitability of factor-specific innovations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that convergence to balanced growth implies zero capital-augmenting innovations: in the long run, the economy exhibits purely resource-augmenting technical change. This result provides sound microfoundations for the broad class of models of exogenous/endogenous growth where resource-augmenting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.

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File URL: https://mpra.ub.uni-muenchen.de/1040/1/MPRA_paper_1040.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1040.

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Date of creation: 07 Mar 2006
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Handle: RePEc:pra:mprapa:1040
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  15. 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.
  16. Simone Valente, 2004. "Sustainable Development: Renewable Resources and Technological Progress," CEIS Research Paper 54, Tor Vergata University, CEIS.
  17. Karen Pittel & Amigues Jean-Pierre & Thomas Kuhn, 2005. "Endogenous growth and recycling : a material balance approach," CER-ETH Economics working paper series 05/37, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  18. Di Maria Corrado & Smulders Sjak A., 2005. "Trade Pessimists vs Technology Optimists: Induced Technical Change and Pollution Havens," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-27, January.
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