IDEAS home Printed from https://ideas.repec.org/a/cup/macdyn/v15y2011i03p293-325_00.html
   My bibliography  Save this article

Endogenous Growth, Backstop Technology Adoption, And Optimal Jumps

Author

Listed:
  • Valente, Simone

Abstract

This paper analyzes a two-phase endogenous growth model in which the adoption of a backstop technology (e.g., solar) yields a sustained supply of essential energy inputs previously obtained from exhaustible resources (e.g., oil). Growth is knowledge-driven and the optimal timing of technology switching is determined by welfare maximization. The optimal path exhibits discrete jumps in endogenous variables: technology switching implies sudden reductions in consumption and output, an increase in the growth rate, and instantaneous adjustments in saving rates. Due to the positive growth effect, it is optimal to implement the new technology when its current consumption benefits are substantially lower than those generated by old technologies.

Suggested Citation

  • Valente, Simone, 2011. "Endogenous Growth, Backstop Technology Adoption, And Optimal Jumps," Macroeconomic Dynamics, Cambridge University Press, vol. 15(3), pages 293-325, June.
    • Handle: RePEc:cup:macdyn:v:15:y:2011:i:03:p:293-325_00
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1365100510000027/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Simone Valente, 2005. "Sustainable Development, Renewable Resources and Technological Progress," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 30(1), pages 115-125, January.
    2. Valente, Simone, 2008. "Intergenerational transfers, lifetime welfare, and resource preservation," Environment and Development Economics, Cambridge University Press, vol. 13(1), pages 53-78, February.
    3. Edward Barbier, 1999. "Endogenous Growth and Natural Resource Scarcity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 14(1), pages 51-74, July.
    4. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    5. Partha Dasgupta & Richard J. Gilbert & Joseph E. Stiglitz, 1982. "Invention and Innovation Under Alternative Market Structures: The Case of Natural Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(4), pages 567-582.
    6. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Economic Integration and Endogenous Growth," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 1, pages 3-32, World Scientific Publishing Co. Pte. Ltd..
    7. William D. Nordhaus, 1973. "The Allocation of Energy Resources," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 529-576.
    8. Masao Ogaki & Carmen M. Reinhart, 1998. "Measuring Intertemporal Substitution: The Role of Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1078-1098, October.
    9. Daron Acemoglu, 2002. "Directed Technical Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(4), pages 781-809.
    10. Di Maria, Corrado & Valente, Simone, 2008. "Hicks meets Hotelling: the direction of technical change in capital–resource economies," Environment and Development Economics, Cambridge University Press, vol. 13(6), pages 691-717, December.
    11. Joseph Stiglitz, 1974. "Growth with Exhaustible Natural Resources: Efficient and Optimal Growth Paths," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 123-137.
    12. Dasgupta, Partha & Stiglitz, Joseph, 1981. "Resource Depletion under Technological Uncertainty," Econometrica, Econometric Society, vol. 49(1), pages 85-104, January.
    13. Bramoulle, Yann & Olson, Lars J., 2005. "Allocation of pollution abatement under learning by doing," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1935-1960, September.
    14. Aznar-Márquez, J. & Ruiz-Tamarit, J.R., 2005. "Renewable Natural Resources And Endogenous Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 9(2), pages 170-197, April.
    15. Tsur, Yacov & Zemel, Amos, 2003. "Optimal transition to backstop substitutes for nonrenewable resources," Journal of Economic Dynamics and Control, Elsevier, vol. 27(4), pages 551-572, February.
    16. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-874, November.
    17. Alvarez-Cuadrado, Francisco, 2008. "Growth outside the stable path: Lessons from the European reconstruction," European Economic Review, Elsevier, vol. 52(3), pages 568-588, April.
    18. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 3-28.
    19. Tomiyama, Ken, 1985. "Two-stage optimal control problems and optimality conditions," Journal of Economic Dynamics and Control, Elsevier, vol. 9(3), pages 317-337, November.
    20. Makris, Miltiadis, 2001. "Necessary conditions for infinite-horizon discounted two-stage optimal control problems," Journal of Economic Dynamics and Control, Elsevier, vol. 25(12), pages 1935-1950, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Should we adopt solar energy before it is more efficient than fuel energy?
      by Economic Logician in Economic Logic on 2009-03-12 23:00:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. van der Meijden, Gerard & Smulders, Sjak, 2018. "Technological Change During The Energy Transition," Macroeconomic Dynamics, Cambridge University Press, vol. 22(4), pages 805-836, June.
    2. Bonneuil, N. & Boucekkine, R., 2016. "Optimal transition to renewable energy with threshold of irreversible pollution," European Journal of Operational Research, Elsevier, vol. 248(1), pages 257-262.
    3. Raouf Boucekkine & Aude Pommeret & Fabien Prieur, 2012. "Optimal Regime Switching and Threshold Effects: Theory and Application to a Resource Extraction Problem under Irreversibility," Working Papers 12-14, LAMETA, Universtiy of Montpellier, revised May 2012.
    4. Barreto, Raul A., 2018. "Fossil fuels, alternative energy and economic growth," Economic Modelling, Elsevier, vol. 75(C), pages 196-220.
    5. Zon A.H. van & David P.A., 2013. "Designing an optimal 'tech fix' path to global climate stability : directed R&D and embodied technical change in a multi‐phase framework," MERIT Working Papers 2013-041, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    6. Zon, Adriaan van, 2016. "On the optimum timing of the global carbon-transition under conditions of extreme weather-related damages: further green paradoxical results," MERIT Working Papers 2016-010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Bretschger, Lucas & Valente, Simone, 2018. "Productivity Gaps And Tax Policies Under Asymmetric Trade," Macroeconomic Dynamics, Cambridge University Press, vol. 22(6), pages 1391-1427, September.
    8. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2010. "Trade and welfare: Does industrial organization matter?," Economics Letters, Elsevier, vol. 109(2), pages 85-87, November.
    9. Ngo Van Long & Fabien Prieur & Klarizze Puzon & Mabel Tidball, 2013. "Markov Perfect Equilibria in Differential Games with Regime Switching Strategies," Working Papers 13-06, LAMETA, Universtiy of Montpellier, revised Jan 2014.
    10. Boucekkine, R. & Pommeret, A. & Prieur, F., 2013. "Optimal regime switching and threshold effects," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2979-2997.
    11. van der Meijden, G.C., 2013. "The macroeconomic dynamics of trade liberalization, resource exploitation, and backstop technologies," Other publications TiSEM 988fc892-3596-4af3-9964-d, Tilburg University, School of Economics and Management.
    12. Long, Ngo Van & Prieur, Fabien & Tidball, Mabel & Puzon, Klarizze, 2017. "Piecewise closed-loop equilibria in differential games with regime switching strategies," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 264-284.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Löschel, Andreas & Otto, Vincent M., 2009. "Technological uncertainty and cost effectiveness of CO2 emission reduction," Energy Economics, Elsevier, vol. 31(Supplemen), pages 4-17.
    2. Kollenbach, Gilbert, 2017. "Unilateral climate Policy and the Green Paradox: Extraction Costs matter," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168245, Verein für Socialpolitik / German Economic Association.
    3. Valente, Simone, 2011. "Habit formation and resource dependence in dynastic economies," Mathematical Social Sciences, Elsevier, vol. 61(3), pages 131-145, May.
    4. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
    5. Hori, Takeo & Yamagami, Hiroaki, 2014. "Intellectual property rights protection in the presence of exhaustible resources," MPRA Paper 58064, University Library of Munich, Germany.
    6. van der Meijden, Gerard & Smulders, Sjak, 2018. "Technological Change During The Energy Transition," Macroeconomic Dynamics, Cambridge University Press, vol. 22(4), pages 805-836, June.
    7. Bretschger, Lucas & Smulders, Sjak, 2012. "Sustainability and substitution of exhaustible natural resources," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 536-549.
    8. Gilbert Kollenbach, 2019. "Unilateral climate policy and the green paradox: Extraction costs matter," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1036-1083, August.
    9. Otto, Vincent M. & Löschel, Andreas, 2008. "Technological Uncertainty and Cost-effectiveness of CO2 Emission Trading Schemes," ZEW Discussion Papers 08-050, ZEW - Leibniz Centre for European Economic Research.
    10. Bretschger, Lucas, 2020. "Malthus in the light of climate change," European Economic Review, Elsevier, vol. 127(C).
    11. Takeo Hori & Hiroaki Yamagami, 2018. "Intellectual property rights protection in the presence of exhaustible resources," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(4), pages 759-784, October.
    12. Jouvet, Pierre-André & Schumacher, Ingmar, 2012. "Learning-by-doing and the costs of a backstop for energy transition and sustainability," Ecological Economics, Elsevier, vol. 73(C), pages 122-132.
    13. Li, George Yunxiong & Ascani, Andrea & Iammarino, Simona, 2024. "The material basis of modern technologies. A case study on rare metals," Research Policy, Elsevier, vol. 53(1).
    14. Lafforgue, Gilles, 2008. "Stochastic technical change, non-renewable resource and optimal sustainable growth," Resource and Energy Economics, Elsevier, vol. 30(4), pages 540-554, December.
    15. Prudence Dato, 2017. "Energy Transition Under Irreversibility: A Two-Sector Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 797-820, November.
    16. Just, Richard E. & Netanyahu, Sinaia & Olson, Lars J., 2005. "Depletion of natural resources, technological uncertainty, and the adoption of technological substitutes," Resource and Energy Economics, Elsevier, vol. 27(2), pages 91-108, June.
    17. Antony, Jürgen & Klarl, Torben, 2022. "Poverty and sustainable development around the world during transition periods," Energy Economics, Elsevier, vol. 110(C).
    18. Ryo Horii & Masako Ikefuji, 2014. "Environment and Growth," DSSR Discussion Papers 21, Graduate School of Economics and Management, Tohoku University.
    19. Färnstrand Damsgaard, Erika, 2012. "Exhaustible resources, technology choice and industrialization of developing countries," Resource and Energy Economics, Elsevier, vol. 34(3), pages 271-294.
    20. Simone Valente, 2007. "Human Capital, Resource Constraints and Intergenerational Fairness," CER-ETH Economics working paper series 07/68, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

    More about this item

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:15:y:2011:i:03:p:293-325_00. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/mdy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.