 Stochastic technical change, non-renewable resource and optimal sustainable growthResource and Energy Economics, 2008, vol. 30, issue 4, 540-554 Abstract: We develop a stochastic endogenous growth model involving a non-renewable resource, in which innovation arrivals are governed by a non-stationary Poisson process. Using a CRRA analytical example, we characterize the optimal trajectories of the model and analyze the effects of uncertainty in the sense of Rothschild and Stiglitz by computing a mean-preserving spread. We show that increased variability in the innovation process always implies a smaller optimal R&D effort, since this leads to a reduced marginal rate of return. Effects on the other variables of the model may also be unambiguously identified depending upon the relative risk aversion of agents, the social discount rate and the marginal arrival rate of innovations. Finally, we investigate the conditions under which, on average, the economy reaches a sustainable growth path. Keywords: Non-renewable; resource; Drastic; innovations; Sustainability; Poisson; uncertainty; Mean-preserving; spread (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:resene:v:30:y:2008:i:4:p:540-554 Access Statistics for this article Resource and Energy Economics is currently edited by J. F. Shogren and S. Smulders More articles in Resource and Energy Economics from Elsevier |
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