Directed Technical Change as a Response to Natural Resource Scarcity

By John Hassler, Per Krusell, Conny Olovsson. Journal of Political Economy, 2021

121 citations recorded by the source corpus.

We develop a quantitative macroeconomic theory of input-saving technical change to analyze how markets economize on scarce natural resources, with an application to fossil fuel. We find that aggregate US data call for a very low short-run substitution elasticity between energy and the capital/labor inputs. Our estimates imply that energy-saving technical change took off when the oil shocks hit in the 1970s. This response implies significant substitutability with the other inputs in the long run: even under ever-rising energy prices, long-run consumption growth is still possible, along with a modest factor share of energy.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/ba46c435fce39a31ed5a8fbd58e29ef42075d88e

How researchers see this paper

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In Economics and Econometrics

1. J. Álvarez
2. Esteban Rossi-Hansberg
3. Giovanni Peri
4. Arnaud Costinot
5. David J. Deming
6. Stephen J. Redding
7. Richard E. Baldwin
8. Cecile Gaubert

In Renewable Energy, Sustainability and the Environment

1. Esteban Rossi-Hansberg
2. J. Álvarez

Citations in the corpus

• The Economic Geography of Global Warming (2021, background): “SeeHassler et al. (2019) for a modern treatment and quantification of Pigouvian logic applied to climate policy. r ) .”