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This volume studies the role of natural resources in development and economic diversification. It brings together a variety of analytical perspectives, ranging from econometric analyses of economic growth to historical studies of successful development experiences in countries with abundant natural resources.

This article demonstrates the critical relationship between the characteristics of the production function and the strategic incentives in a team. Equilibrium effort increases in team size when substitutability is low relative to returns to scale. Effort levels are actually strategic complements when returns to scale exceed the substitutability of members' effort. Moreover, even with equal shares the well-known 1/n problem is determined by returns to scale and becomes worse as returns increase. While a target scheme can support the optimal output level as an equilibrium, it does not completely deter free riding. A team member will accommodate shirking by increasing their own effort within a remarkably large \"accommodation zone\" where the additional effort cost is less than the bonus. This accommodation of shirking by others exists for different returns to scale and even for very low levels of substitutability.

This paper investigates the relative importance of cyclical fluctuations in labor and capital utilization, increasing returns to scale, and technology shocks as explanations for procyclical productivity. It exploits the intuition that materials inputs do not have variable utilization rates, and materials are likely to be used in fixed proportions with value added. Therefore, materials growth is a good measure of unobserved changes in capital and labor utilization. Using this measure shows that cyclical factor utilization is very important, returns to scale are about constant, and technology shocks are small and have low correlation with either output or hours growth.

In this article we study a class of evolutionary models of industrial agglomeration with local positive feedbacks, which allow for a wide set of empirically testable implications. Their roots rest in the Generalized Polya Urn framework. Here, however, we build on a birth-death process over a finite number of locations and a finite population of firms. The process of selection among production sites that are heterogeneous in their 'intrinsic attractiveness' occurs under a regime of dynamic increasing returns depending on the number of firms already present in each location. The general model is presented together with a few examples of small economies which help to illustrate the properties of the model and characterize its asymptotic behavior. Finally, we discuss a number of empirical applications of our theoretical framework. The basic model, once taken to the data, is able to empirically disentangle the relative strength of technologically specific agglomeration drivers (affecting differently firms belonging to different industrial sectors in each location) from site-specific geographical forces (horizontally acting upon all sectors in each location).

Humanity has just crossed a major landmark in its history with the majority of people now living in cities. Cities have long been known to be society's predominant engine of innovation and wealth creation, yet they are also its main source of crime, pollution, and disease. The inexorable trend toward urbanization worldwide presents an urgent challenge for developing a predictive, quantitative theory of urban organization and sustainable development. Here we present empirical evidence indicating that the processes relating urbanization to economic development and knowledge creation are very general, being shared by all cities belonging to the same urban system and sustained across different nations and times. Many diverse properties of cities from patent production and personal income to electrical cable length are shown to be power law functions of population size with scaling exponents, β, that fall into distinct universality classes. Quantities reflecting wealth creation and innovation have β [almost equal to]1.2 >1 (increasing returns), whereas those accounting for infrastructure display β [almost equal to]0.8 <1 (economies of scale). We predict that the pace of social life in the city increases with population size, in quantitative agreement with data, and we discuss how cities are similar to, and differ from, biological organisms, for which β<1. Finally, we explore possible consequences of these scaling relations by deriving growth equations, which quantify the dramatic difference between growth fueled by innovation versus that driven by economies of scale. This difference suggests that, as population grows, major innovation cycles must be generated at a continually accelerating rate to sustain growth and avoid stagnation or collapse.

Technology shocks and declining productivity have been advanced as important factors driving the Great Depression in the United States, based on real business cycle theory. We estimate an improved measure of technology for interwar manufacturing, using data from the U.S. census reports. There is clear evidence of increasing returns to scale and we find no statistical proof that technology shocks led to changes in hours worked or other inputs. This contradicts a key prediction of real business cycle theory. We find that increasing returns to scale are not due to market power but to labor and capital hoarding.

Most policy-relevant work on climate change in the social sciences either analyzes costs and benefits of particular policy options against important but often narrow sets of objectives or attempts to explain past successes or failures. We argue that an \"applied forward reasoning\" approach is better suited for social scientists seeking to address climate change, which we characterize as a \"super wicked\" problem comprising four key features: time is running out; those who cause the problem also seek to provide a solution; the central authority needed to address it is weak or non-existent; and, partly as a result, policy responses discount the future irrationally. These four features combine to create a policy-making \"tragedy\" where traditional analytical techniques are ill equipped to identify solutions, even when it is well recognized that actions must take place soon to avoid catastrophic future impacts. To overcome this tragedy, greater attention must be given to the generation of path-dependent policy interventions that can \"constrain our future collective selves.\" Three diagnostic questions result that orient policy analysis toward understanding how to trigger sticky interventions that, through progressive incremental trajectories, entrench support over time while expanding the populations they cover. Drawing especially from the literature on path dependency, but inverting it to develop policy responses going forward, we illustrate the plausibility of our framework for identifying new areas of research and new ways to think about policy interventions to address super wicked problems.

Most economic theorists assume that energy efficiency-the biggest global provider of energy services-is a limited and dwindling resource whose price- and policy-driven adoption will inevitably deplete its potential and raise its cost. Influenced by that theoretical construct, most traditional analysts and deployers of energy efficiency see and exploit only a modest fraction of the worthwhile efficiency resource, saving less and paying more than they should. Yet empirically, modern energy efficiency is, and shows every sign of durably remaining, an expanding-quantity, declining-cost resource. Its adoption is constrained by major but correctable market failures and increasingly motivated by positive externalities. Most importantly, in both newbuild and retrofit applications, its quantity is severalfold larger and its cost lower than most in the energy and climate communities realize. The efficiency resource far exceeds the sum of savings by individual technologies because artfully choosing, combining, sequencing, and timing fewer and simpler technologies can save more energy at lower cost than deploying more and fancier but dis-integrated and randomly timed technologies. Such 'integrative design' is not yet widely known or applied, and can seem difficult because it is simple, but is well proven, rapidly evolving, and gradually spreading. Yet the same economic models that could not predict the renewable energy revolution also ignore integrative design and hence cannot recognize most of the efficiency resource or reserves. This analytic gap makes climate-change mitigation look harder and costlier than it really is, diverting attention and investment to inferior options. With energy efficiency as its cornerstone and needing its pace redoubled, climate protection depends critically on seeing and deploying the entire efficiency resource. This requires focusing less on individual technologies than on whole systems (buildings, factories, vehicles, and the larger systems embedding them), and replacing theoretical assumptions about efficiency's diminishing returns with practitioners' empirical evidence of expanding returns.

The aim of this paper is to discuss the effect on returns to scale on the local determinacy properties of the steady state in a continuous-time two-sector economy with endogenous labor supply and sector-specific externalities. First we show that when labor is inelastic and the elasticity of intertemporal substitution in consumption is large enough, for any configuration of the returns to scale, local indeterminacy is obtained if there is a capital intensity reversal between the private and the social levels. Second, we prove that when labor is infinitely elastic, saddlepoint stability is obtained if the investment good sector has constant social returns, whereas local indeterminacy arises if the investment good sector has increasing social returns and the elasticity of intertemporal substitution in consumption admits intermediate values. Finally, our main conclusion shows that local indeterminacy requires a low elasticity of labor when the investment good has constant social returns, but requires either a low enough or a large enough elasticity of labor when the investment good has increasing social returns.

We develop a model of friendship formation that sheds light on segregation patterns observed in social and economic networks. Individuals have types and see typedependent benefits from friendships. We examine the properties of a steady-state equilibrium of a matching process of friendship formation. We use the model to understand three empirical patterns of friendship formation: (i) larger groups tend to form more same-type ties and fewer other-type ties than small groups, (ii) larger groups form more ties per capita, and (iii) all groups are biased towards same-type relative to demographics, with the most extreme bias coming from middle-sized groups. We show how these empirical observations can be generated by biases in preferences and biases in meetings. We also illustrate some welfare implications of the model.