erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Exhaustible Natural Resources and Economic Growth

Ricardo Coelho de Faria (University of Brasilia and Catholic University of Brasilia, Brasil)
Benjamin M. Tabak (University of Brasilia, Catholic University of Brasilia and Central Bank of Brasil, Brasil)

Abstract

This paper analyses the consequences of the use of an exhaustible natural resource in domestic production for economic growth. We use a Cobb-Douglas type production function that allows for human capital and a natural resource but we exclude physical capital. In this approach technical progress is considered neutral-Hicksian and the natural resource is necessary and indispensable for production. To analyze the influence of the use of the natural resource on economic growth we used a dynamic optimization approach, where the social planner must choose an optimal path for his consumption stream. Results are compared to other models, particularly, models using Rawl’s max-min criteria. In our paper it is found that we have a faster degradation of the natural resource than in papers using Rawl’s max-min criteria.

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