The dynamic implications of energy-intensive capital accumulation

Burcu Fazlıoğlu (), Agustin Pérez-Barahona () and Çağrı Sağlam
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Agustin Pérez-Barahona: ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech, X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris

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Abstract: We study the implications of assuming diff erent energy intensities for physical capital accumulation and fi nal good production in an overlapping generations (OLG) resource economy. Diff ering from the standard OLG literature, but consistently with the empirical evidence, physical capital accumulation is assumed to be relatively more energy-intensive than consumption. Focusing on exhaustible resources, we fi nd that OLG equilibria can exhibit a "non-classical behaviour": our model can generate complex dynamics where extraction may increase during some periods and decrease afterwards. As a consequence, in contrast to the classical response predicted by the standard approach, resource prices may not increase monotonically. This result points out the importance of the assumptions about energy intensity considered in the literature.

Keywords: natural resources; energy prices; overlapping generations (search for similar items in EconPapers)
Date: 2014-10-13
New Economics Papers: this item is included in nep-dge and nep-ene
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