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Optimal Induced Innovation and Growth with Congestion of a Limited Natural Resource

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Author Info
Tavani, Daniele

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Abstract

In a simple Neoclassical Growth Model with endogenous technical change, I expand on the hypothesis of Induced Innovation including a production externality from a xed input, called `land', which represents the carrying capacity of the earth's atmosphere. Land is assumed to be congested by the use of labor and capital in production. A market economy where land is free will fail to reach a steady state, and may end up in either of three possible cases: (i) a catastrophe driven by overaccumulation; (ii) a state in which Induced Innovation stops capital deepening but not environmental decline; (iii) a path of perpetual decumulation of capital resembling an industrial counterrevolution. A planned economy, instead, will assign a shadow-price to land, thus setting in motion the Induced Innovation engine and fostering land-augmenting technological progress which will reduce environmental stress. The unique equilibrium if this economy is found to be locally asymptotically stable in the numerical analysis for substitution elasticities smaller than 1. The corresponding direction of technical change is characterized by constant shares of all inputs, a positive growth rate of labor- and land-augmenting technologies, and by a rate of growth of capital-augmentation equal to zero.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11525.

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Date of creation: 10 Nov 2008
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Handle: RePEc:pra:mprapa:11525

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Related research
Keywords: Induced Innovation; Climate Change; Technological Change; Functional Distribution of Income.;

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Find related papers by JEL classification:
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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  7. Bronwyn H. Hall & Jacques Mairesse & Benoit Mulkay & Jacques Mairesse, 1999. "Firm Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years," Econometrics 9902001, EconWPA. [Downloadable!]
    Other versions:
  8. Skott, Peter, 1981. "Technological Advance with Depletion of Innovation Possibilities: A Comment and Some Extensions," Economic Journal, Royal Economic Society, vol. 91(364), pages 977-87, December. [Downloadable!] (restricted)
  9. Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation, Yale University. [Downloadable!]
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  14. Foley, Duncan K., 2003. "Endogenous technical change with externalities in a classical growth model," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 167-189, October. [Downloadable!] (restricted)
  15. Nadiri, M Ishaq, 1970. "Some Approaches to the Theory and Measurement of Total Factor Productivity: A Survey," Journal of Economic Literature, American Economic Association, vol. 8(4), pages 1137-77, December. [Downloadable!] (restricted)
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