Lucas Bretschger

Sustainability and Substitution of Exhaustible Natural Resources: How Resource Prices Affect Long-term R&D Investments

A method and a device for the formation of the braided sheath on a cable in such a way that the sheath when mounted in such as a connection box gives good contact with the casing of the box.

Energy Prices, Growth,and the Channels in Between: Theory and Evidence

The paper presents stylized cross-country evidence for a negative relationship between energy use and economic growth. Based on this motivation it develops a multisector framework to derive the growth impact of energy from first principles. The structural model is empirically estimated for a sample of 37 developed countries with five-year average data over the period 1975–2009. Estimations of both separate equations and simultaneous systems of equations are performed. The empirical results show a negative impact of energy use on investments in physical capital and knowledge formation. The estimations of simultaneous equations exhibit a dynamic effect of energy use: decreasing energy input and increasing energy prices induce additional investments fostering long-run growth. The growth effect counteracts the negative static effects of lower energy use.

Climate Change and Uneven Development

In this paper, using a theoretical model with endogenous capital depreciation, we study the effects of climate change and adaptation on long-run development. We show that climate change affects economic growth depending on climate exposure and adaptation efficiency, which are asymmetric between different countries. Poor countries are likely to be hurt more, because of the negative effects of climate change on the rate of depreciation of the assets that represent the engine of growth. These asymmetries generally induce growth deficits and unsustainability traps in less-developed economies.

The Implications of Heterogeneous Resource Intensities on Technical Change and Growth

We analyze the long-term dynamics of an economy in which sectors are heterogeneous with respect to the intensity of natural resource use. It is shown that heterogeneity induces technical change to be biased towards resource-intensive sectors. Along the balanced growth path, the sectoral structure of the economy is constant as the higher resource dependency in resource-intensive sectors is compensated by enhanced research activities. Resource taxes have no impact on dynamics except when the tax rate varies over time. Research subsidies and the sectoral provision of productivity-enhancing public goods raise growth and provide an effective tool for structural policy.

How to substitute in order to sustain: knowledge driven growth under environmental restrictions

This paper presents different substitution mechanisms which determine, in a theoretical framework, the conditions for long-term sustainable development. In a one-sector approach and in two versions of a multi-sector endogenous growth model, the accumulation and the substitution of man-made inputs for natural resources are analysed. Assuming man-made capital to be an output of a specific sector of the economy, the elasticities of substitution between the different inputs play a more complex role than suggested by the one-sector approach. According to the multi-sector models, the prediction of growth becoming sustainable emerges as realistic, provided that the sectoral adjustment costs in the economy are not too high.

Population Growth and Natural Resource Scarcity: Long-Run Development Under Seemingly Unfavourable Conditions

The paper considers an economy which is constrained by natural resource use and driven by knowledge accumulation. Resources are essential inputs in all the sectors. It is shown that population growth and poor input substitution are not detrimental but, on the contrary, even necessary for obtaining a sustainable consumption level. We find a new type of Hartwick rule defining the conditions for a constant innovation rate. The rule does not apply to capital but to labour growth, the crucial input in research. Furthermore, it relates to the sectoral structure of the economy and to demographic transition. The results continue to hold with a backstop technology and are extended for the case of minimum resource constraints.

Climate policy and equity principles: fair burden sharing in a dynamic world

The paper argues that negotiation costs can prevent the international community from finding a new international climate agreement. To define a feasible way of facilitating the negotiation process, I analyze basic equity principles and their relationship to climate policy and economic development. Based on the most relevant principles, I propose a general synthetic rule for burden sharing in international climate policy. The rule avoids complexity and comprises both egalitarian and cost-sharing aspects, which appears to be crucial for achieving a climate agreement. Carbon budgets for the different countries are calculated under different parameter assumptions.

On the predictability of knowledge formation: The tortuous link between regional specialization trade, and development

This paper examines the relation between industrial mix, trade, and regional productivity growth. For this purpose, a dynamic model of the open economy with diversified sectoral knowledge formation and incomplete interregional knowledge diffusion is constructed. The theoretical framework is first used to show the consequences of increasing globalization on regional growth. It is then applied to German regional data in order to investigate whether there is evidence of generally specified patterns of knowledge formation. It emerges that some causal relationships are robust for the case of German regions but cannot be exploited by economic policy in general.

Market Concentration and the Likelihood of Financial Crises

According to theory, market concentration affects the likelihood of a financial crisis in different ways. The “concentration-stability” and the “concentrationfragility” hypotheses suggest opposing effects operating through specific channels. Using data of 160 countries for the period 1970-2007, this paper empirically tests these indirect effects of financial market structure. We set up a simultaneous system in order to jointly estimate financial stability and the relevant channel variables as endogenous variables. Our findings provide support for the assumption of channel effects in general and both the concentrationstability and the concentration-fragility hypothesis in particular. The effects are found to vary between high and low income countries.

GLOBALIZATION, THE VOLATILITY OF INTERMEDIATE GOODS PRICES, AND ECONOMIC GROWTH

We set up a dynamic stochastic model of a stylized economy comprising a final output sector (with traditional and modern firms) and an intermediate goods sector. It is shown that market integration reduces the volatility of the rate of return of capital invested in modern firms. The induced portfolio decision of households leads to a reallocation of capital from traditional to modern firms. Despite the presence of a reverse precautionary saving channel, the growth rate unambiguously increases due to the reallocation of capital. Empirical estimates for OECD countries confirm the theoretical results.