Sustainability and substitution of exhaustible natural resources. How resource prices affect long-term R&D-investments

Lucas Bretschger and Sjak Smulders ()

No 03/26, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: Traditional resource economics has been criticised for assuming too high elasticities of substitution, not observing material balance principles and relying too much on planner solutions to obtain long-term growth. By analysing a multi-sector R&Dbased endogenous growth model with exhaustible natural resources, labour, and knowledge capital as inputs, the present paper addresses this critique. We study transitional dynamics and the long-term growth path and identify conditions under which firms keep spending on research and development so that growth is sustained. We demonstrate that long-run growth can be sustained under free market conditions even when elasticities of substitution between man-made inputs and resources are low.

Keywords: Growth; non-renewable resources; substitution; investment incentives; endogenous technological change; sustainability (search for similar items in EconPapers)
JEL-codes: O33 O41 Q20 Q30 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-06
New Economics Papers: this item is included in nep-ene, nep-env and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Sustainability and Substitution of Exhaustible Natural Resources. How resource prices affect long-term R&D investments (2003)
Working Paper: Sustainability and Substitution of Exhaustible Natural Resources: How Resource Prices Affect Long-Term R&D Investments (2003)
Working Paper: Sustainability and Substitution of Exhaustible Natural Resources: How Resource Prices Affect Long-Term R&D Investments (2003)
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