Sustainable Growth and Secular Trends

Pietro Peretto and Simone Valente

MPRA Paper from University Library of Munich, Germany

Abstract: We fully characterize the transition to sustained growth of resource-constrained economies using a model of industrialization that reproduces key stylized facts of resource use and prices. Natural scarcity, endogenous demography and innovations generate different growth regimes: knowledge-based innovations can potentially feed productivity growth in the long run, but exhaustible primary inputs and population pressure may halt economic development at earlier stages. Our model reproduces two well-documented empirical regularities -- a U-shaped path of resource prices and a hump-shaped path of resource extraction -- as secular trends that arise across growth regimes. Resource use and prices reach their respective turning points at different stages of development, and we may observe a peak in extraction followed by a long period where both resource use and its market price fall. The decoupling of price and quantity dynamics hinges on general-equilibrium interactions between demography and three sources of endogenous technological change, namely, increases in the mass of intermediate firms, vertical innovations within each intermediate firm, and endogenous extraction costs affected by learning-by-doing in the primary sector.

Keywords: Endogenous Growth; Population; Natural Resources; Sustainability. (search for similar items in EconPapers)
JEL-codes: E10 L16 O31 O40 (search for similar items in EconPapers)
Date: 2024-04-29
New Economics Papers: this item is included in nep-env, nep-gro and nep-tid
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