Directed Technical Change as a Response to Natural Resource Scarcity (original) (raw)
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Energy Use, Endogenous Technical Change and Economic Growth
2004
A model of endogenous growth and non-renewable resource extraction is presented. Resource owners endogenously determine the extraction path and firms endogenously determine the rate and direction of technological change. We explore under what conditions the short-run dynamics of the model can replicate some important trends of last decades' OECD experience. These are, in particular, an increase in per capita energy supply, a decrease in the cost share of energy in GDP, a decrease in energy cost relative to labor cost, and reductions in energy use per unit of GDP. We also study the long-run properties of the model to examine whether current trends are sustainable.
Fueling growth when oil peaks: Directed technological change and the limits to efficiency
European Economic Review, 2013
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.
Revista de Economía del Rosario, 2008
We formulate and solve a model of factor saving technological improvement considering three factors of production: labor, capital and energy. The productive activities have three main characteristics: first, in order to use capital goods firms need energy; second, there are two sources of energy: nonexhaustible and exhaustible; third, capital goods can be of different qualities and the quality of these goods can be changed along two dimensions-reducing the need of energy or changing the source of energy used in the production process. The economy goes through three stages of development after industrialization. In the first one, firms make use of exhaustible energy and the efficiency in the use of energy is constant. In the second stage, as the price of energy grows the efficiency in its use is increased. In the third stage, the price of exhaustible sources is so high that firms have incentives to use non-exhaustible sources of energy. During this stage the price of energy is constant. In this set up, the end of the oil age has level effects on consumption and output but it does not cause the collapse of the economic system.
2006
In this paper we argue two theses. First, we suggest that economies evolve along a long-term trajectory that corresponds closely to increases in the production and consumption of useful work (in the thermodynamic sense) rather than energy (exergy) inputs per se. Second, we argue that when economies experience sudden shocks and structural changes, due (for instance) to wars or major depressions, they are accompanied by significant changes in the quantity and patterns of energy (exergy) consumption and useful work output. To support these assertions we have performed unit root and structural change tests to characterise the temporal behaviour of the factors of production. These results have implications for understanding the role of energy in the economy, for modelling co-variation between output and factor inputs and for identification of the most appropriate form of the production function. 1. Rationale Economies appear to evolve along a long term trajectory driven by technological ...
Endogenous technical progress in fossil fuel demand: The case of France
Journal of Policy Modeling, 1996
Economic studies aiming at assessing the impact on the economy of the various policies that could be implemented to reduce carbon emissions have a common feature. The base-case scenario, or "business as usual" scenario, assumes a technical progress represented as a time trend. This implicitly implies that non-price factors (exogenous energy-saving technical progress, policy-induced technical change, elimination of inefficient technologies, or change in the composition of GDP) will help reduce energy intensity in the future, in the same magnitudes as it has done so far, without taking account of how a given policy could affect those factors. This paper explains how an advanced econometric tool, the Kalman filter, allows the researcher to estimate technical progress in a dynamic fashion, and so that those factors are endogenous to the model. Hence, the routes for further improvement in diminishing energy intensity will be realistically assessed, and any modifications on non-price factors will be instantly taken into account as part of the stimulation procedure.
Energy Efficiency, 2015
The simultaneous influence of increasing oil scarcity, greenhouse gas control and renewable energy targets will result in a future of sustained energy prices. Whether modern economies can find a smooth path away from fossils is a fundamental socioeconomic and political question, which according to standard economics depends to a large extent on the degree of substitution between energy and capital. We study this issue by modelling the manufacturing sector with a translog cost function in seven OECD countries using the EU-KLEMS database for the period 1970-2005. After a literature survey, different production structures accounting for input substitution, returns to scale and technical change are estimated and substitution elasticities derived. Our results indicate complementarity between energy and capital, suggesting that an increase in energy price lowers the capital input, which, in turn, might lead to a lower output. 1. Introduction According to economic production theory the dependence of the current economic system on non-renewable resources can be relieved in two ways, namely through input substitution and technical change (TC). The first is often assessed by estimation of elasticities of substitution, which quantify the 'flexibility' of an economy to produce a given output with different combinations of inputs. The second is captured through variables quantifying improvements in input use efficiency. W h i l e t h e m o t i v a t i o n o f e a r l y s t u d i e s o f s u b s t i t u t i o n i n p r o d u c t i o n w a s t o a s s i s t governments in determining optimal energy taxes and to assess the impact of oil price shocks due to political factors, at present geological scarcity of fossil fuels and climate change influence the research agenda (Aleklett 2009; Kerr 2011; Salameh 2010,). Both peak oil and climate policy contribute to increasing energy prices and a need to substitute away from fossil energy sources. Input substitution has long been an issue of strong disagreement, as highlighted, among others, by the Daly versus Solow/Stiglitz debate (Daly a,b; Solow 1997; Stiglitz 1997). The focus of the controversy was whether substitution or complementarity characterizes the relation between energy and capital inputs in the production process at the national level. This concern goes back to the theoretical work of Georgescu-Roegen (1971) and exercises with the system dynamics model of Meadows et al. (1972), both of which pointed at energy and materials as being limiting factors to economic growth. In response, neoclassical economics developed an approach to include resource depletion within theoretical growth models, focusing on substitution and TC as growth-enabling factors. Generally, economists have been confident about the reduction of the energy (as well as scarce material) intensity of the economy through these two mechanisms, which in turn are seen as being driven by price mechanisms (Dasgupta and Heal 1974; Stiglitz 1974). Energy-capital substitution can be seen as a measure of 'robustness' of an economy to higher energy prices, whether due to increasing resource scarcity or stricter climate policy (carbon pricing). The present period, characterized by high energy prices and a worldwide financial and economic crisis, confirms the relevance of the debate on capital-energy substitutability. We address this issue by quantifying the historical substitution potential between energy and capital following a widely accepted approach in the econometrics of production: we derive the cross-price elasticity from a 4-input translog cost function. Data on manufacturing output and inputs (volumes and prices) are taken from the EU-KLEMS database covering the period 1970-2005 and seven countries, namely France, Germany, Italy, Japan, Spain, UK and USA. The translog function represents a flexible approach as it incorporates both returns to scale (RTS) and TC, while it assumes that scarcity of production factors is reflected by factor
2019
The shale gas revolution can potentially reduce CO2 emissions in the short-run in countries which depend heavily on coal. Yet, it may also discourage innovation in green technologies, leading to lower emissions in the long-run. We document that the shale gas revolution was accompanied by a collapse in innovation in green electricity. We build a model of directed technical change where energy is produced using coal, and/or natural gas, and/or a green source of energy. We derive conditions under which, as a result of the above trade-off, the shale gas revolution reduces emissions in the short-run but increases emissions in the long-run. We then use data on electricity production to calibrate the model.
In this paper we argue two theses. First, we suggest that economies evolve along a long-term trajectory that corresponds closely to increases in the production and consumption of useful work (in the thermodynamic sense) rather than energy (exergy) inputs per se. Second, we argue that when economies experience sudden shocks and structural changes, due (for instance) to wars or major depressions, they are accompanied by significant changes in the quantity and patterns of energy (exergy) consumption and useful work output. To support these assertions we have performed unit root and structural change tests to characterise the temporal behaviour of the factors of production. These results have implications for understanding the role of energy in the economy, for modelling co-variation between output and factor inputs and for identification of the most appropriate form of the production function. 1. Rationale
ISSN: 1955-611XEnergy and Capital in a New-Keynesian Framework
2012
The economic implications of oil price shocks have been extensively studied since the oil price shocks of the 1970s’. Despite this huge literature, no dynamic stochastic general equilibrium model is available that captures two well-known stylized facts: 1) the stagflationary impact of an oil price shock, together with 2) two possible reactions of real wages: either a decrease (as in the US) or an increase (as in Japan). We construct a New-Keynesian dsge model, which takes the case of an oil-importing economy where oil cannot be stored and where fossil fuels are used in two different ways: One part of the imported energy is used as an additional input factor next to capital and labor in the intermediate production of manufactured goods, the remaining part of imported energy is consumed by households in addition to their consumption of the final good. Oil prices, capital prices and nominal government spendings are exogenous random processes. We show that, without capital accumulation,...