The 12th International Conference on Water Resource and Environment (WRE 2026)

Abstract: As semiconductor technology—essential for AI-driven digitalization—gains increasing importance, a global race is underway for rare metals, the raw materials used in semiconductors. To counter China, which dominates the rare metals market through a low-price strategy fueled by subsidies, governments around the world are moving to secure rare metals through seabed mineral resources. How do import prices for seabed mineral resources and domestic mining subsidies affect economic welfare through mineral extraction, the development of mining technologies, and economic growth rates? To answer this question, this study incorporates a dynamic resource extraction model and cost-reduction-oriented mining innovation into an R&D-based growth model. Depending on the resource-input technology per markup, the amount of resources extracted per unit of labor becomes socially excessive. Since mining subsidies increase the volume of resources extracted, proven reserves decline in the long run. Under a resource-importing regime, a “poverty trap” regarding the level of resource exploration arises; within this context, increased subsidies lead to a decline in the level of resource exploration and an increase in the difficulty of extraction. On the other hand, in a high steady state and under a resource-self-sufficient system, these subsidies lead to an increase in the level of resource exploration and a decrease in the difficulty of extraction. In this case, a rise in resource import prices leads to an increase in the level of resource exploration and the difficulty of extraction. As productivity in the R&D sector declines, the welfare-deteriorating effect of subsidies shifts to a welfare-improving effect.