Stiglitz (1974) examines the implications of introducing exhaustible natural resources as an essential factor of production in the standard neoclassical growth model with constant rate of population growth. He shows that, if a steady-state solution exists, it is a saddle-point. Hence, exhaustible resources have the effect of making an otherwise stable system highly unstable. In the present paper I argue that the assumption of a constant rate of population growth is implausible in an economy constrained by exhaustible resources, and examine the implications of making the population growth rate a function of consumption and capital per capita. This simple modification alters the characteristics of the steady state in a number of interesting ways. In particular, it turns out that the steady state is stable for a range of values of the saving/income ratio.

Journal Article Production and Investment Response to Changing Market Conditions, Technical Know-How, and Government Policies: A Vintage Model of the Agricultural Sector Get access Alessandro Cigno Alessandro Cigno University of Birmingham Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 38, Issue 1, January 1971, Pages 63–94, https://doi.org/10.2307/2296623 Published: 01 January 1971