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.

Stabilizing pollution levels in the long run is a pre-requisite for sustainable growth. We develop a neoclassical growth model with endogenous emission reduction predicting that, along optimal sustainable paths, pollution growth rates are (i) positively related to output growth (scale effect) and (ii) negatively related to emission levels (defensive effect). This dynamic law reduces to a convergence equation that is empirically tested for two major and regulated air pollutants – sulfur oxides and nitrogen oxides – with a panel of 25 European countries spanning the years 1980–2005. Traditional parametric models are rejected by the data. More flexible regression techniques confirm the existence of both the scale and the defensive effect, supporting the model predictions

We study the interactions between technological change, resource scarcity and population dynamics in a Schumpeterian model with endogenous fertility.We …nd a pseudo-Malthusian equilibrium in which population is constant and determined by resource scarcity while income grows exponentially. If labor and resources are substitutes in production, income and fertility dynamics are selfbalancing and the pseudo-Malthusian equilibrium is the global attractor of the system. If labor and resources are complements, income and fertility dynamics are self-reinforcing and drive the economy towards either demographic explosion or collapse. Introducing a minimum resource requirement per capita, we obtain constant population even under complementarity.

In this paper, using a theoretical model with endogenous capital depreciation, we study the effects of climate change and adaptation on long-run development. We show that climate change affects economic growth depending on climate exposure and adaptation efficiency, which are asymmetric between different countries. Poor countries are likely to be hurt more, because of the negative effects of climate change on the rate of depreciation of the assets that represent the engine of growth. These asymmetries generally induce growth deficits and unsustainability traps in less-developed economies.

No abstract

Conflicts between optimality and sustainability are typical in the literature on sustainable development. Using a 'capital-resource' model of optimal growth, Pezzey and Withagen (1998) have recently proved that if natural resources are exhaustible, the time-path of consumption is single-peaked, declining from some point in time onwards. This paper extends the model to include technical progress, resource renewability and population growth. The main result is that, for any constant returns to scale technology, optimal paths can be sustainable only if the social discount rate does not exceed the sum of the rates of resource regeneration and augmentation net of population growth. Capital depreciation is neutral with respect to this necessary condition for sustainability. The development of resource-saving technologies is crucial for sustaining consumption per capita in the long run.

This paper analyzes overlapping-generations models where natural capital is owned by selfish agents. Transfers in favor of young agents reduce the rate of depletion and increase output growth. It is shown that intergenerational transfers may be preferred to laissez-faire by an indefinite sequence of generations: if the resource share in production is sufficiently high, the welfare gain induced by preservation compensates for the loss due to taxation. This conclusion is reinforced when other assets are available, e.g. man-made capital, claims on monopoly rents, and R&D investment. Transfers raise the welfare of all generations, except that of the first resource owner: if resource endowments are taxed at time zero, all successive generations support resource-saving policies for purely selfish reasons.

No abstract