Energy Use, Endogenous Technical Change and Economic Growth

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.

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