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Scarcity, regulation and endogenous technical progress

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  • BOUCEKKINE, Raouf
  • HRITONENKO, Natali
  • YATSENKO, Yuri

Abstract

This paper studies to which extent a firm using a scarce resource input and facing environmental regulation, can still manage to have a sustainable growth of output and profits. The firm has a vintage capital technology with two complementary factors, capital and a resource input subject to quota, the latter being increasingly scarce through an exogenously rising price. The firm can scrap obsolete capital and invest in adoptive and/or innovative R&D resource-saving activities. We show that there exists a threshold level for the growth rate of the resource price above which the firm will collapse. Below this threshold, two important properties are found. In the long-run, a sustainable growth is possible at a growth rate which is independent of the resource price. In the short-run, not only will the firms respond to increasing resource price by increasing R&D on average, but they will also reduce capital expenditures and speed up the scrapping of older capital goods. Finally, we identify optimal intensive Vs extensive transitional growth regimes depending on the history of the firms.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2334.

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Handle: RePEc:cor:louvrp:-2334

Note: In : Journal of Mathematical Economics, 47(2), 186-199, 2011
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  1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  2. Feichtinger, Gustav & Hartl, Richard F. & Kort, Peter M. & Veliov, Vladimir M., 2008. "Financially constrained capital investments: The effects of disembodied and embodied technological progress," Journal of Mathematical Economics, Elsevier, vol. 44(5-6), pages 459-483, April.
  3. Kamien, Morton I & Schwartz, Nancy L, 1969. "Induced Factor Augmenting Technical Progress from a Microeconomic Viewpoint," Econometrica, Econometric Society, vol. 37(4), pages 668-84, October.
  4. Boucekkine, Raouf, et al, 1998. " Creative Destruction, Investment Volatility, and the Average Age of Capital," Journal of Economic Growth, Springer, vol. 3(4), pages 361-84, December.
  5. Feichtinger, Gustav & Hartl, Richard F. & Kort, Peter M. & Veliov, Vladimir M., 2005. "Environmental policy, the porter hypothesis and the composition of capital: Effects of learning and technological progress," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 434-446, September.
  6. Raouf, BOUCEKKINE & Natali, HRITONENKO & Yuri, YATSENKO, 2008. "Optimal firm behavior under environmental constraints," Discussion Papers (ECON - Département des Sciences Economiques) 2008017, Université catholique de Louvain, Département des Sciences Economiques.
  7. Hart, Rob, 2004. "Growth, environment and innovation--a model with production vintages and environmentally oriented research," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1078-1098, November.
  8. Boucekkine, R. & Germain, M. & Licandro, O., . "Replacement echoes in the vintage capital growth model," CORE Discussion Papers RP -1275, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. BOUCEKKINE, Raouf & RUIZ-TAMARIT, Ramon, 2004. "Special functions for the study of economic dynamics: The case of the Lucas-Uzawa model," CORE Discussion Papers 2004084, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Jess Benhabib & Aldo Rustichini, 1990. "Vintage Capital, Investment and Growth," Discussion Papers 886, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," NBER Working Papers 6437, National Bureau of Economic Research, Inc.
  12. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, vol. 92(1), pages 160-180, March.
  13. Kort, P. & Hartl, R.F. & Veliov, V.M. & Feichtinger, G., 2005. "Capital accumulation under technological progress and learning: a vintage capital approach," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154966, Tilburg University.
  14. Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute.
  15. Tsur, Yacov & Zemel, Amos, 2005. "Scarcity, growth and R&D," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 484-499, May.
  16. Malcomson, James M., 1975. "Replacement and the rental value of capital equipment subject to obsolescence," Journal of Economic Theory, Elsevier, vol. 10(1), pages 24-41, February.
  17. Adam Jaffe & Richard Newell & Robert Stavins, 2002. "Environmental Policy and Technological Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(1), pages 41-70, June.
  18. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
  19. Omar Licandro & Luis Puch & Antonio Sampayo, 2008. "A Vintage Model of Trade in Secondhand Markets and the Lifetime of Durable Goods," Mathematical Population Studies, Taylor & Francis Journals, vol. 15(4), pages 249-266.
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Citations

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Cited by:
  1. Kredler, Matthias, 2014. "Vintage human capital and learning curves," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 154-178.
  2. Raouf Boucekkine & David de la Croix and Omar Licandro, 2011. "Vintage Capital Growth Theory: Three Breakthroughs," Working Papers 565, Barcelona Graduate School of Economics.
  3. Thierry Bréchet & Natali Hritonenko & Yuri Yatsenko, 2013. "Adaptation and Mitigation in Long-term Climate Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 55(2), pages 217-243, June.
  4. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2013. "Health, Work Intensity, and Technological Innovations," AMSE Working Papers 1320, Aix-Marseille School of Economics, Marseille, France, revised Mar 2013.
  5. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2011. "Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies," Working Papers halshs-00632887, HAL.
  6. Raouf Boucekkine & David De La Croix & Omar Licandro, 2011. "Vintage capital theory: Three breakthroughs," Working Papers halshs-00599074, HAL.

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