Sustainability and substitution of exhaustible natural resources. How resource prices affect long-term R&D-investments

Arbeitspapier

Traditional resource economics has been criticised for assuming too high elasticities of substitution, not observing material balance principles and relying too much on planner solutions to obtain long-term growth. By analysing a multi-sector R&Dbased endogenous growth model with exhaustible natural resources, labour, and knowledge capital as inputs, the present paper addresses this critique. We study transitional dynamics and the long-term growth path and identify conditions under which firms keep spending on research and development so that growth is sustained. We demonstrate that long-run growth can be sustained under free market conditions even when elasticities of substitution between man-made inputs and resources are low.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Working Paper Series ; No. 03/26

Classification and Topics

• Classification: Wirtschaft ; Renewable Resources and Conservation: General ; Nonrenewable Resources and Conservation: General ; One, Two, and Multisector Growth Models ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: Growth ; non-renewable resources ; substitution ; investment incentives ; endogenous technological change ; sustainability ; Erschöpfbare Ressourcen ; Nachhaltige Entwicklung ; Endogenes Wachstumsmodell ; Ressourcenökonomik ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bretschger, Lucas ; Smulders, Sjak
• Event: Veröffentlichung
• (who): ETH Zurich, CER-ETH - Center of Economic Research
• (where): Zurich
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/171470
• Last update: 10.03.2025, 11:43 AM CET