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Abstract

This study uses a system dynamics model based on an integration of micro-and macroeconomic theories to understand economic growth with a nonrenewable natural resource. The case of oil-dependent Indonesia is used as an empirical reference for the study. Long-run growth patterns resulting from various intuitively appealing development policies are analyzed, and an attempt is made to identify the best policy set for attaining a sustainable growth pattern. The study shows that influencing factor prices to facilitate adoption of capital-intensive technologies accelerates development and is a key policy for sustaining growth in the long run.