On Technical Change in the Elasticities of Resource Inputs

Jakub Growiec and Ingmar Schumacher

No 2006031, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: This article considers an economy whose production function takes both renewable and non-renewable resources as inputs. We extend the current literature by allowing for exogneous technical change in the elasticity of subsstitution between these two types of resources. In addition, we study the consequences of biased technical change which alters the resources’ relative productivities. We derive long-run asymptotic results, which we use to compare several cases. In the benchmark case of no technical change, our results are close to those obtained by Dasgupta and Heal (1974). In the case of technical change helps obtain positive long-run production despite the depletion of non-renewable resources. In the biased technical change case, long-run production is only possible either if non-renewable resources are non-essential or if biased technical change is quick enough to compensate for the decreasing flow of non-renewable resources. We embed our production function in an optimal model and study its dynamics. As a steady state (or a balanced growth path) is only attainable as time goes to infinity, we resort to numerical simulations to convey what is happening during the short and medium run. Our results provide new considerations for the debate on natural resources. We suggest that technical change should be directed to the resource which is most important for production.

Keywords: Elasticity of substitution; Technical change; Biased technical change; Non-renewable resources; Renewable resources (search for similar items in EconPapers)
JEL-codes: O30 Q20 Q30 (search for similar items in EconPapers)
Pages: 37
Date: 2006-06-01
New Economics Papers: this item is included in nep-agr and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://sites.uclouvain.be/econ/DP/IRES/2006-31.pdf (application/pdf)

Related works:
Journal Article: On technical change in the elasticities of resource inputs (2008)
Working Paper: On technical change in the elasticities of resource inputs (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvec:2006031

Access Statistics for this paper

More papers in Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().