 Fuel for economic growth?Johan Gars and Conny Olovsson Journal of Economic Theory, 2019, vol. 184, issue C Abstract: Using data for 134 countries, we document that countries deriving a larger share of their energy from fossil fuel are richer and grow faster. We then set up an endogenous growth model where final output is produced with a non-energy and two substitutable energy intermediate goods: fossil fuel and biofuel. With non-energy and energy goods being gross complements, and with higher costs for improving the energy efficiency for biofuel than for fossil fuel, there exist two balanced growth paths: one with low growth where energy is derived from biofuel and one with high growth where energy is sourced from fossil fuel. Heterogeneity in initial technology levels can generate the Great Divergence. The demand for fossil fuel in technologically advanced countries drives up its price, thereby reducing demand for fossil fuel in less advanced countries that instead choose the more stagnant energy input. Keywords: Growth; Malthusian stagnation; Industrial revolution; Great divergence; Technological progress; Energy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:184:y:2019:i:c:s002205311930095x DOI: 10.1016/j.jet.2019.104941 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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