The Environment and Directed Technical Change
AbstractThis paper introduces endogenous and directed technical change in a growth model with environmental constraints. A unique final good is produced by combining inputs from two sectors. One of these sectors uses "dirty" machines and thus creates environmental degradation. Research can be directed to improving the technology of machines in either sector. We characterize dynamic tax policies that achieve sustainable growth or maximize intertemporal welfare. We show that: (i) in the case where the inputs are sufficiently substitutable, sustainable long-run growth can be achieved with temporary taxation of dirty innovation and production; (ii) optimal policy involves both “carbon taxes” and research subsidies, so that excessive use of carbon taxes is avoided; (iii) delay in intervention is costly: the sooner and the stronger is the policy response, the shorter is the slow growth transition phase; (iv) the use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire when the two inputs are substitutes. Under reasonable parameter values and with sufficient substitutability between inputs, it is optimal to redirect technical change towards clean technologies immediately and optimal environmental regulation need not reduce long-run growth.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.93.
Date of creation: Jul 2010
Date of revision:
Environment; Exhaustible Resources; Directed Technological Change; Innovation;
Other versions of this item:
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2009. "The Environment and Directed Technical Change," NBER Working Papers 15451, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2010. "The Environment and Directed Technical Change," Seminar Papers 762, Stockholm University, Institute for International Economic Studies.
- Acemoglu, Daron & Aghion, Philippe & Bursztyn, Leonardo & Hemous, David, 2011. "The Environment and Directed Technical Change," CEPR Discussion Papers 8660, C.E.P.R. Discussion Papers.
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-AGR-2010-10-02 (Agricultural Economics)
- NEP-ALL-2010-10-02 (All new papers)
- NEP-DGE-2010-10-02 (Dynamic General Equilibrium)
- NEP-ENE-2010-10-02 (Energy Economics)
- NEP-REG-2010-10-02 (Regulation)
- NEP-RES-2010-10-02 (Resource Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
- Philippe Aghion & Peter Howitt, 2009.
"The Economics of Growth,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 9780262012638, December.
- Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014.
"Optimal Taxes on Fossil Fuel in General Equilibrium,"
Econometric Society, vol. 82(1), pages 41-88, 01.
- Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2011. "Optimal Taxes on Fossil Fuel in General Equilibrium," NBER Working Papers 17348, National Bureau of Economic Research, Inc.
- Golosov, Mikhail & Hassler, John & Krusell, Per & Tsyvinski, Aleh, 2011. "Optimal taxes on fossil fuel in general equilibrium," CEPR Discussion Papers 8527, C.E.P.R. Discussion Papers.
- Daron Acemoglu, 2009.
"When Does Labor Scarcity Encourage Innovation?,"
NBER Working Papers
14809, National Bureau of Economic Research, Inc.
- Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
- Grimaud, André & Rougé, Luc, 2007.
"Environment, Directed Technical Change and Economic Policy,"
IDEI Working Papers
384, Institut d'Économie Industrielle (IDEI), Toulouse.
- André Grimaud & Luc Rouge, 2008. "Environment, Directed Technical Change and Economic Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(4), pages 439-463, December.
- Corrado Di Maria & Simone Valente, 2006.
"The Direction of Technical Change in Capital-Resource Economies,"
CER-ETH Economics working paper series
06/50, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
- van der Zwaan, B. C. C. & Gerlagh, R. & G. & Klaassen & Schrattenholzer, L., 2002. "Endogenous technological change in climate change modelling," Energy Economics, Elsevier, vol. 24(1), pages 1-19, January.
- Manne, Alan & Richels, Richard, 2004. "The impact of learning-by-doing on the timing and costs of CO2 abatement," Energy Economics, Elsevier, vol. 26(4), pages 603-619, July.
- Popp, David, 2004. "ENTICE: endogenous technological change in the DICE model of global warming," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 742-768, July.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The Environment and Directed Technical Change: Acemoglu et al.
by David Stern in Stochastic Trend on 2010-04-28 08:28:00
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading lists or Wikipedia pages:
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah).
If references are entirely missing, you can add them using this form.