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Green Innovation And Economic Growth In A North-South Model

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  • Fischer, Carolyn

    (Resources for the Future)

  • Witajewski-Baltvilks, Jan

Abstract

If one region of the world switches its research effort from dirty to clean technologies, will other regions follow? To investigate this question we built a North-South model that combines insights from directed technological change and quality ladder endogenous growth models. We allow researchers in the South to create business-stealing innovations. We found that (i) after the North switches from dirty to clean technologies, the growing value of clean markets will motivate technology firms in the South to follow the switch; however this result is conditional on the North being sufficiently large. (ii) If the two regions invest research effort to different sectors and the outputs of the two sectors are gross substitutes, then the long run growth rates in both regions are smaller than if the global research effort were to be invested in one sector. (iii) If the North switches to R&D in clean technologies, the benevolent central planner in the South would ensure that all South R&D switches too, unless the planner’s discount rate is high.

Suggested Citation

  • Fischer, Carolyn & Witajewski-Baltvilks, Jan, 2019. "Green Innovation And Economic Growth In A North-South Model," RFF Working Paper Series 19-04, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-19-04
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    File URL: https://www.rff.org/documents/1979/WP-19-02-WB-Fischer-2.pdf
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    References listed on IDEAS

    as
    1. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    2. van den Bijgaart, Inge, 2017. "The unilateral implementation of a sustainable growth path with directed technical change," European Economic Review, Elsevier, vol. 91(C), pages 305-327.
    3. Mads Greaker & Tom-Reiel Heggedal, 2012. "A Comment on the Environment and Directed Technical Change," Discussion Papers 713, Statistics Norway, Research Department.
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