Environment, Directed Technical Change and Economic Policy (original) (raw)
Related papers
Economic growth and polluting resources: Market equilibrium and optimal policies
Economic Modelling, 2013
This paper develops an endogenous growth model to study the decentralized equilibrium and the optimum conditions in an economy which uses polluting resources. The model includes two policy instruments, a subsidy to final consumption and an emissions tax. It also considers two forms of endogenous technical change, pollution-reducing knowledge and horizontal innovation. We show that, if the efficiency of knowledge to reduce emissions is sufficiently high, a higher output is compatible with lower emissions in both levels and growth rates. Additionally, if the two instruments are used together the economy may achieve a higher output and lower emissions since the subsidy may offset, at least partially, the negative tax effects.
A Two-Sector Model of Economic Growth with Endogenous Technical Change and Pollution Abatement
Environmental Modeling & Assessment, 2019
We provide insights into the relationships between technological development, economic growth, and pollution accumulation, using a two-sector model of economic growth with endogenous technical change. In the model, output is produced using a polluting resource. Production can be used for either consumption or abatement of pollution. Scientists can be allocated between two research activities: resource-saving and abatement-augmenting technologies. Our results indicate conditional path dependency. Specifically, when the innovative capacity in the resource-saving research sector is sufficiently high, scientists are allocated to improve only the resource-saving technology, independently of the state of the technologies and environment. Consequently, the allocation of researchers is path-independent. When the innovative capacity in the abatement-augmenting research sector is sufficiently high, the optimal allocation of researchers depends on the initial level of the pollution stock or technologies but eventually will be directed to improve the abatement technology. We further characterize the optimal steady-state and off-steady-state dynamics and show that green growth is always socially optimal. By using a two-sector model, we address a lack of attention to multi-sector growth models in neoclassical growth theory and show that distinct results and transitional dynamics can emerge.
Optimal Public Policy in a Schumpeterian Model of Endogenous Growth with Environmental Pollution
The paper utilizes a model of endogenous growth with vertical innovation (á la Aghion-Howitt) to examine how the inclusion of a production related pollution externality affects the prospect for long-run growth of a closed economy. It is derived that the social optimum exhibits the possibility of long-run sustainable growth, such that consumption, capital stock and output grow without bound, knowledge also grows in an unbounded fashion, and both -the intensity and stock of pollution -fall. In comparison, at the unregulated market equilibrium, a clear conflict arises between sustaining economic growth and environment protection, as growing pollution stock ceases the opportunity for long run growth in output, capital stock and consumption. Finally, in deriving the optimal public policy tool-kit, given the distortions in the unregulated market economy, it is shown that a positive and growing rate of tax on pollution, an ad valorem subsidy on capital and a positive R and D subsidy would implement the socially desirable outcome. However, a theoretical possibility of an optimal tax on R and D cannot be ruled out in an exceptional situation of too low a productivity of the R and D sector.
Polluting non-renewable resources, innovation and growth: welfare and environmental policy
Resource and Energy Economics, 2005
We analyze the impact of the pollution generated by the use of non-renewable resources on the standard results of growth models. In this context, we obtain a Hotelling rule which is not a pure efficiency condition any longer. Subsequently, we show that some of the optimal paths' standard properties change: in particular, an increase in the households' psychological discount rate leads to a slower extraction of the resource. Moreover, we present a simple endogenous growth model that allows us to study the effects of an environmental policy aimed at correcting the distortion introduced at the equilibrium. We show that the tax level does not matter, and that a decreasing tax on the resource use yields the optimum.
Endogenous Technological Change and the Cost of Environmental Policy
Conventional wisdom argues that environmental policy is less costly if environmental policy induces new clean technologies. In contrast to this argument, we show that with endogenous technological change the cost of environmental policy (a reduction in emissions) can be larger than without endogenous technological change. To explain this paradox we analyse two main issues. The first key issue is whether new technology increases or reduces the marginal abatement cost. While most analyses in environmental economics consider it natural that the marginal abatement costs fall, we argue in line with the macroeconomic growth literature that technological change might increase the productivity of polluting inputs and hence increase the marginal abatement cost. The second issue is whether environmental policy increases or decreases investment and innovation. Even when stricter environmental policy induces some pollution-saving technological change, it might do so at the cost of a reduced overall rate of investment and innovation, which crowds out production and consumption and thus makes environmental policy more costly.
Endogenous Growth, Green Innovation and GDP Deceleration in a World with Polluting Production Inputs
2013
We study economic growth and pollution control in a model with endogenous rate and direction of technical change. Economic growth (growth of real GDP) results from growth in the quantity and productivity of polluting intermediates. Pollution can be controlled by reducing the pollution intensity of a given quantity through costly research (green innovation) and by reducing the share of polluting intermediate quantity in GDP. Without clean substitutes, saving on polluting inputs implies that the rate of GDP growth remains below productivity growth (deceleration). While neither green innovation nor deceleration is chosen under laissez-faire, both contribute to long-run optimal pollution control for reasonable parameter values. In our baseline-model, there are no exhaustible resources. In an extension, we analyze the e ects of resource-scarcity on the environment, long-run growth and the direction of technical change.
SSRN Electronic Journal, 2000
In an open economy, can unilateral environmental policies undertaken by a group of committed countries ensure sustainable growth? This paper addresses this question in a dynamic model with directed technical change. There are two countries and two tradeable goods. One of the two goods (the polluting good) is produced with a clean input and a dirty input, which causes a global externality. Innovation can be targeted at both sectors and, within the polluting sector, at clean or dirty technologies. For most of the analysis, innovation is local. I show that carbon taxes in a single country are generally unable to ensure sustainable growth, that is, to prevent environmental quality from falling below some critical threshold. A temporary combination of clean research subsidies and a tari¤ in a single country can ensure sustainable growth for su¢ ciently large initial quality of the environment-in some cases, clean research subsidies alone may not do so. I characterize the …rst best policy, the world optimal policy under the constraint that one country must be in laissez-faire, and the optimal policy from the point of view of a single country. Calibrated numerical simulations show that, relative to autarky, trade accelerates environmental degradation, but that when one country undertakes the appropriate policies, trade helps reducing environmental degradation. Finally, I add knowledge spillovers and show that carbon taxes in a single country are still generally unable to ensure sustainable growth.
Growth, Innovation and Environmental Policy: Clean vs. Dirty Technical Change by
2000
This paper focuses on a two sector endogenous growth model with environmental quality, with two goods and factors, one clean and one dirty. Endogenous technological change creates either clean or dirty innovations, depending on relative profitability. The reduction of emissions intensity of aggregate output is achieved by changing the dirty-bias of technology in the economy. The decentralized equilibrium growth rate
Innovation and Environmental Policy: Clean vs. Dirty Technical Change
SSRN Electronic Journal, 2010
We study a two sector endogenous growth model with environmental quality with two goods and two factors of production, one clean and one dirty. Technological change creates clean or dirty innovations. We compare the laissez-faire equilibrium and the social optimum and study first-and second-best policies. Optimal policy encourages research toward clean technologies. In a second-best world, we claim that a portfolio that includes a tax on the polluting good combined with optimal innovation subsidy policies is less costly than increasing the price of the polluting good alone. Moreover, a discriminating innovation subsidy policy is preferable to a non-discriminating one.