Adding a Nonrenewable Resource to the Neoclassical Growth Model

The present paper adds a nonrenewable resource to the neoclassical growth model and examines the economics of substitution in this three factor growth model. Adjustments in the price of capital, wage, income per capita, and the two input ratios are derived in a general equilibrium setting. In contrast to the assumption of partial equilibrium resource economics, depletion may rise as the resource price increases due to the increased productivity that occurs with investment and labor growth. To maintain steady income per capita, both resource profit and capital income must be invested