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Exhaustible resources, technology choice and industrialization of developing countries

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  • Färnstrand Damsgaard, Erika
Abstract
How should the world economy adapt to the increased demand for exhaustible resources from countries like China and India? To address that issue, this paper presents a dynamic model of the world economy with two technologies for production; a resource technology, which uses an exhaustible resource as an input and an alternative technology, which does not. I find that both the time path of resource extraction and the adoption of the alternative technology depend on the optimal allocation of capital across the technologies, and on the size of the capital stock in relation to the resource stock. In particular, if the capital stock is low, only the resource technology is used initially and the alternative technology is adopted with a delay. Next, I use the model to analyze the effects of industrialization of developing countries on the extraction of oil and technology choice for energy production. As a result of industrialization, the alternative technology for energy production is adopted earlier.

Suggested Citation

  • Färnstrand Damsgaard, Erika, 2012. "Exhaustible resources, technology choice and industrialization of developing countries," Resource and Energy Economics, Elsevier, vol. 34(3), pages 271-294.
    • Handle: RePEc:eee:resene:v:34:y:2012:i:3:p:271-294
    DOI: 10.1016/j.reseneeco.2011.12.004
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    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economic Development Technological Change, and Growth > Technological Change: Choices and Consequences

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    Cited by:

    1. Gutierrez, Juan P. & Vianna, Andre C., 2020. "Price effects of steel commodities on worldwide stock market returns," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).

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    More about this item

    Keywords

    Exhaustible resources; Technological change;

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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