Scandinavian Working Papers in Economics
Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)
No 375: Directed technical change as a response to natural-resource scarcity
John Hassler, Per Krusell and Conny Olovsson ()
Additional contact information
John Hassler: IIES, University of Gothenburg and CEPR
Per Krusell: IIES, CEPR and NBER
Conny Olovsson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Abstract: How do markets economize on scarce natural resources? With an applica-tion to fossil energy, we emphasize technological change aimed at saving on the scarce resource. We develop quantitative macroeconomic theory as a tool for interpreting the past and thinking about the future. We argue, first, that aggre-gate U.S. data calls for a short-run substitution elasticity between energy and the capital/labor inputs that is near Leontief. Given this fact and an aggregate CES function, we note that energy-saving technical change took o right as the oil shocks hit in the 1970s. We rationalize this observation using a theory that views technical change as directed: it can be used to save on different inputs and, hence, the long-run substitutability between inputs becomes higher than Leontief. For our application, we estimate long-run dependence on fossil energy - measured by its factor share - to climb to a little below 10%; absent endogenous technical change directed toward energy-saving, it would go to 100%.
Keywords: Sustainability; Natural resource scarcity; technological change; economic growth; energy
56 pages, July 1, 2019
Full text files
no.-375-directed-tec...esource-scarcity.pdfFull text
Questions (including download problems) about the papers in this series should be directed to Lena Löfgren ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:rbnkwp:0375This page generated on 2024-09-13 22:16:58.