Sources of Economic Growth in Models with Non-Renewable Resources

This paper re-examines the conditions under which endogenous economic growth can emerge in neoclassical models with non-renewable resources. Our analysis is based on a general production function which encompasses the Cobb-Douglas specification. We show that endogenous growth is possible only when the elasticity of substitution between effective labour input and effective resource input is constant and equal to one. If this does not hold (as some empirical studies suggested), then economic growth is solely driven by an exogenous technological factor. We also show that the assumption on this elasticity will affect the model's policy implications in regard to resource taxation.