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Backstop Technology Adoption

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Author Info
Matti Liski
Pauli Murto

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Abstract

We consider how efficient markets adopt technologies that reduce dependence on volatile factors such as oil. We find a relationship between volatility and technology overlap: new technology entry rate exceeds old technology exit rate under sufficient uncertainty. From this follows that efficient adoption is characterized by prolonged coexistence of alternative technologies and that uncertainty increasingly propagates from input to output market despite the declining use of the volatile factor in production. The properties depend on (i) the option to remain idle rather than exit, (ii) heterogeneity in factor supply, and (iii) factor market volatility

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Publisher Info
Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 260.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:260

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Related research
Keywords: technology adoption; factor markets; uncertainty; irreversible investment; energy;

Find related papers by JEL classification:
D9 - Microeconomics - - Intertemporal Choice and Growth
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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This page was last updated on 2009-11-26.

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