The Direction of Technical Change in Capital-Resource Economies

Corrado Di Maria and Simone Valente

No 06/50, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We analyze a multi-sector growth model with directed technical change where man-made capital and exhaustible resources are essen- tial for production. The relative profitability of factor-specific inno- vations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that convergence to bal- anced growth implies zero capital-augmenting innovations: in the long run, the economy exhibits purely resource-augmenting technical change. This result provides sound microfoundations for the broad class of models of exogenous/endogenous growth where resource-aug- menting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.

Keywords: Endogenous Growth; Directed Technical Change; Exhaustible Resources; Sustainability (search for similar items in EconPapers)
JEL-codes: O31 O33 O41 Q32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-03
New Economics Papers: this item is included in nep-agr, nep-cse, nep-dev, nep-dge, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Working Paper: The Direction of Technical Change in Capital-Resource Economies (2006)
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