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The influence of different production functions on modeling resource extraction and economic growth

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  • Voosholz, Frauke

Abstract

In this paper we discuss the influence of using different production functions on modeling the resource extraction rates and economic growth. The focus is set on the modeling of the production sector, which requires either non-renewable resources, renewable resources or a combination of both resources for production. There are great differences between the possible assumptions when modeling the substitution process between the different input factors. It is shown that the existence of an optimal extraction rate in conjunction with economic growth depends on the specification of the production function even if the same parameterization is used. The target is to provide an overview on the different possibilities of modeling, and to support the decision which kind of production function should be used for modeling different aspects of economic growth.

Suggested Citation

  • Voosholz, Frauke, 2014. "The influence of different production functions on modeling resource extraction and economic growth," CAWM Discussion Papers 72, University of Münster, Center of Applied Economic Research Münster (CAWM).
  • Handle: RePEc:zbw:cawmdp:72
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    Keywords

    economic growth; natural resources; production function;

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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