Water in a Factor Proportions Trade Model

A nonrenewable energy resource added to capital and labor in the neoclassical growth model introduces its depletion dynamics and expands the role of substitution.  Optimal depletion implies a rising energy price but extraction may increase intermittently due to investment or labor growth according to the pattern of substitution between the three inputs.  Conditions to maintain intergenerational equity are examined.  The paper also analyzes the tragedy of the commons and a myopic monopolist in this three factor growth model.