R&D Policy in Economies with Endogenous Growth and Non-Renewable Resources

Betty Agnani, María-José Gutiérrez and Amaia Iza

No 07/09, ThE Papers from Department of Economic Theory and Economic History of the University of Granada.

Abstract: The aim of this paper is to analyze how active R&D policies affect the growth rate of an economy with endogenous growth and non-renewable resources. We know from Scholz and Ziemens (1999) and Groth (2006) that in infinitely lived agents (ILA) economies, any active R&D policy increases the growth rate of the economy. To see if this result also appears in economies with finite lifetime agents, we developed an endogenous growth overlapping generations (OLG) economy à la Diamond which uses non-renewable resources as essential inputs in final good’s production. We show analytically that a sufficient condition guaranteeing that an active R&D policy increases the growth rate of the economy actually implies a reduction of the use of the non-renewable resources. Numerically we show that in economies with low intertemporal elasticity of substitution (IES), active R&D policies lead the economy to increase the depletion of non-renewable resources. Nevertheless, we find that active R&D policies always imply increases in the endogenous growth rate, in both scenarios. Furthermore, when the IES coefficient is lower (greater) than one, active R&D policies affect the growth rate of the economy in the ILA more (less) than in OLG economies.

Keywords: endogenous growth; R&D; non-renewable resources; overlapping generations; infinitely lived agents; balanced growth path. (search for similar items in EconPapers)
JEL-codes: O13 O40 Q32 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2007-12-31
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http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers07_09.pdf (application/pdf)

Related works:
Working Paper: R&D policy in Economies with Endogenous Growth and Non Renewable Resources (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:gra:wpaper:07/09

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