Sources of Economic Growth in Models with Non-Renewable Resources

Sriket, Hongsilp and Suen, Richard M. H. (2021): Sources of Economic Growth in Models with Non-Renewable Resources.

Abstract

This paper re-examines the conditions under which endogenous economic growth can emerge in neoclassical models with non-renewable resources. Unlike most of the existing studies which focus exclusively on Cobb-Douglas production function, our analysis is based on a general specification. We formally prove that endogenous growth can emerge only under the "knife-edge" condition of a unitary elasticity of substitution between labour input and resource input. If this elasticity is not equal to one (as suggested by empirical evidence), then long-term economic growth is entirely driven by an exogenous technological factor. We also explore the implications of this on resource taxation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Non-Renewable Resources; Endogenous Growth; Knife-Edge Condition; Elasticity of Substitution.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development

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