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

Author

Listed:
  • Francisco J. André
  • Sjak Smulders
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.

Suggested Citation

  • Francisco J. André & Sjak Smulders, 2012. "Fueling Growth when Oil Peaks: Directed Technological Change and the Limits to Efficiency," CESifo Working Paper Series 3977, CESifo.
    • Handle: RePEc:ces:ceswps:_3977
    as

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    More about this item

    Keywords

    non-renewable resources; energy; economic growth; innovation; directed technical change;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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