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.
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Bibliographic InfoPaper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 762.
Length: 54 pages
Date of creation: 25 Apr 2010
Date of revision:
Contact details of provider:
Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Web page: http://www.iies.su.se/
More information through EDIRC
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.
- Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2010. "The Environment and Directed Technical Change," Working Papers 2010.93, Fondazione Eni Enrico Mattei.
- 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-2010-05-29 (Agricultural Economics)
- NEP-ALL-2010-05-29 (All new papers)
- NEP-DGE-2010-05-29 (Dynamic General Equilibrium)
- NEP-ENE-2010-05-29 (Energy Economics)
- NEP-ENV-2010-05-29 (Environmental Economics)
- NEP-FDG-2010-05-29 (Financial Development & Growth)
- NEP-MIC-2010-05-29 (Microeconomics)
- NEP-REG-2010-05-29 (Regulation)
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.:
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- 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.
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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
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