Sustainability and substitution of exhaustible natural resources. How structural change affects long-term R&D-investments

L. Bretschger, Sjak A. Smulders

Research output: Contribution to journalArticleScientificpeer-review

54 Citations (Scopus)


We study long-run growth in a multi-sector economy with non-renewable resource use and endogenous innovations. Unlike recent capital resource models, we find that poor input substitution need not be detrimental for sustainable growth; on the contrary, combined with resource depletion it fosters structural change, which helps to sustain research investments. We derive the properties of the transition path, show which sectors survive in the long run, and discuss whether the economy approximates a steady state with or without a scale effect. The results continue to hold when some sectors exhibit perfect competition.
Original languageEnglish
Pages (from-to)536-549
JournalJournal of Economic Dynamics & Control
Issue number4
Publication statusPublished - 2012

Cite this