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Hicks meets Hotelling : the direction of technical change in capital–resource economies
Author(s)
Date Issued
2008-12
Date Available
2009-02-11T16:41:56Z
Abstract
We analyze a two-sector growth model with directed technical change where man-made capital and exhaustible resources are essential for production. The relative profitability of factor-specific innovations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that any balanced growth equilibrium features purely resource-augmenting technical change. This result is compatible with alternative specifications of preferences and innovation technologies, as it hinges on the interplay between productive efficiency in the final sector, and the Hotelling rule characterizing the efficient depletion path for the exhaustible resource. Our result provides sound micro-foundations for the broad class of models of exogenous/endogenous growth where resource-augmenting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.
Type of Material
Journal Article
Publisher
Cambridge University Press
Journal
Environment and Development Economics
Volume
13
Issue
6
Start Page
691
End Page
717
Copyright (Published Version)
Copyright Cambridge University Press 2008
Subject – LCSH
Economic development--Mathematical models
Technological innovations
Nonrenewable natural resources
Web versions
Language
English
Status of Item
Peer reviewed
ISSN
1469-4395
This item is made available under a Creative Commons License
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