Economic Growth with a Nonrenewable Resource

This paper adds a nonrenewable resource to capital and labor in the neoclassical growth model. The nonrenewable resource introduces its depletion dynamics and expands the influence of input substitution on the growth path. Optimal depletion implies a rising resource price but investment or labor growth may raise extraction along the growth curve. Substitution between inputs plays a critical role in the model dynamics. The paper develops the fundamental conditions for intergenerational equity, and also examines the tragedy of the commons and a myopic resource owner. Thanks for suggestions and comments go to Geir Ashem, Aimee Chin, Telemachos Efthimiadis, Trellis Green, Mark Klined, Mostafa Malki, David Pappel, Roy Ruffin, Charlie Sawyer, Ingmar Schumacher, Kaz Miyagiwa, Santanu Chattarjee, Sharri Byron, John Roufagalas, Farhad Rassekh, Tanya Molodtsova, Tilman Klumpp, Elena Presvanto, Randy Beard, Nazif Durmaz, Dimitri Thomakos, and Alexi Thompson.