Fueling Growth When Oil Peaks: Directed Technological Change and the Limits to Efficiency

39 Pages Posted: 1 Nov 2012

See all articles by Francisco J. André

Francisco J. André

Universidad Complutense de Madrid (UCM) - Faculty of Economics and Business Administration

Sjak Smulders

Tilburg University - Tilburg University School of Economics and Management; University of Calgary - Department of Economics

Date Written: October 30, 2012

Abstract

While fossil energy dependency has declined and energy supply has grown in the postwar world economy, future resource scarcity could cast its shadow on world economic growth soon if energy markets are forward looking. We develop an endogenous growth model that reconciles the current aggregate trends in energy use and productivity growth with the intertemporal dynamics of forward looking resource markets. Combining scarcity-rent driven energy supply (in the spirit of Hotelling) with profit-driven Directed Technical Change (in the spirit of Romer/Acemoglu), we generate transitional dynamics that can be qualitatively calibrated to current trends. The long-run properties of the model are studied to examine whether current trends are sustainable. We highlight the role of extraction costs in mining.

Keywords: non-renewable resources, energy, economic growth, innovation, directed technical change

JEL Classification: O410, Q320, Q430

Suggested Citation

André, Francisco J. and Smulders, Jacobus (Sjak) A., Fueling Growth When Oil Peaks: Directed Technological Change and the Limits to Efficiency (October 30, 2012). CESifo Working Paper Series No. 3977. Available at SSRN: https://ssrn.com/abstract=2168682

Francisco J. André

Universidad Complutense de Madrid (UCM) - Faculty of Economics and Business Administration ( email )

School of Business Administration
Somosaguas Campus
Madrid, Madrid 28223
Spain

Jacobus (Sjak) A. Smulders (Contact Author)

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2920 (Phone)
+31 13 466 3042 (Fax)

HOME PAGE: http://www.uvt.nl/webwijs/english/show.html?anr=801585&lang=en

University of Calgary - Department of Economics ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

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