Fueling growth when oil peaks: Directed technological change and the limits to efficiency

Francisco André and Sjak Smulders ()

European Economic Review, 2014, vol. 69, issue C, 18-39

Abstract: While fossil energy dependency has declined and energy supply has grown in the postwar world economy, future resource scarcity could cast its shadow on world economic growth soon if energy markets are forward looking. We develop an endogenous growth model that reconciles the current aggregate trends in energy use and productivity growth with the intertemporal dynamics of forward looking resource markets. Combining scarcity-rent driven energy supply (in the spirit of Hotelling) with profit-driven Directed Technical Change (in the spirit of Romer/Acemoglu), we generate transitional dynamics that can be qualitatively calibrated to current trends. The long-run properties of the model are studied to examine whether current trends are sustainable. We highlight the role of extraction costs in mining.

Keywords: Non-renewable resources; Energy; Economic growth; Innovation; Directed technical change (search for similar items in EconPapers)
JEL-codes: O41 Q32 Q43 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (34)

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Related works:
Working Paper: Fueling Growth when Oil Peaks: Directed Technological Change and the Limits to Efficiency (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:69:y:2014:i:c:p:18-39

DOI: 10.1016/j.euroecorev.2013.10.007

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