Crossing Hubbert's peak: Portfolio effects in a growth model with exhaustible resources [An article from: Structural Change and Economic Dynamics]

This digital document is a journal article from Structural Change and Economic Dynamics, published by Elsevier in 2007. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
This paper elaborates a two-class growth model with an exhaustible resource (''oil'') and an alternative technique (''solar''). Bequest savers accumulate wealth, consisting of capital and oil, saving a constant fraction of their end-of-period wealth. The price of oil obeys Hotelling's rule. Rising oil prices and the depletion of oil supplies create portfolio effects on the accumulation of capital. When growth is constrained by an exogenously increasing labor force, these wealth effects express themselves in changes in the distribution of income, which first shifts toward profits and then shifts back toward wages as the oil stocks approach depletion. When growth is constrained by capital (the labor force is endogenous), the portfolio effects express themselves in changes in the rate of capital accumulation, which first declines and then rises sharply as the oil stocks approach depletion.