Fueling growth when oil peaks: Directed technological change and the limits to efficiency

F.J. Andre, Sjak A. Smulders

Research output: Contribution to journalArticleScientificpeer-review

14 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)18-39
JournalEuropean Economic Review
Volume69
Issue numberJuly 2014
DOIs
Publication statusPublished - Jul 2014

Keywords

  • non-renewable resources
  • energy
  • economic growth
  • innovation
  • directed technical change

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