IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v102y2012i1p131-66.html
   My bibliography  Save this article

The Environment and Directed Technical Change

Author

Listed:
  • Daron Acemoglu
  • Philippe Aghion
  • Leonardo Bursztyn
  • David Hemous

Abstract

This paper introduces endogenous and directed technical change in a growth model with environmental constraints. The final good is produced from "dirty" and "clean" inputs. We show that: (i) when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation toward clean inputs; (ii) optimal policy involves both "carbon taxes" and research subsidies, avoiding excessive use of carbon taxes; (iii) delay in intervention is costly, as it later necessitates a longer transition phase with slow growth; and (iv) use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire. (JEL O33, O44, Q30, Q54, Q56, Q58)

Suggested Citation

  • Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
  • Handle: RePEc:aea:aecrev:v:102:y:2012:i:1:p:131-66
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.1.131
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    File URL: http://www.aeaweb.org/aer/data/feb2012/20091164_data.zip
    File Function: dataset accompanying article
    Download Restriction: no

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philippe Aghion & Diego Comin & Peter Howitt & Isabel Tecu, 2016. "When Does Domestic Savings Matter for Economic Growth?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 64(3), pages 381-407, August.
    2. André Grimaud & Luc Rouge, 2008. "Environment, Directed Technical Change and Economic Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 439-463.
    3. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
    4. 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.
    5. 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.
    6. 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.
    7. Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen plus one: a comparison of global climate policy architectures," Climate Policy, Taylor & Francis Journals, pages 373-397.
    8. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1055-1089.
    9. 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.
    10. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, pages 686-702.
    11. 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.
    12. Richard G. Newell & Adam B. Jaffe & Robert N. Stavins, 1999. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 941-975.
    13. Sabine Messner, 1997. "Endogenized technological learning in an energy systems model," Journal of Evolutionary Economics, Springer, vol. 7(3), pages 291-313.
    14. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, January.
    15. Daron Acemoglu, 2010. "When Does Labor Scarcity Encourage Innovation?," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1037-1078.
    16. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, pages 703-724.
    17. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, pages 409-434.
    18. Partha Dasgupta, 2008. "Discounting climate change," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 141-169, December.
    19. Philippe Aghion & Peter Howitt, 2009. "The Economics of Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 9780262012638.
    20. Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 226-247, Summer.
    21. David Popp, 2002. "Induced Innovation and Energy Prices," American Economic Review, American Economic Association, pages 160-180.
    22. -, 2009. "Economic growth in the Caribbean," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38668, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    23. William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

    Lists

    This item is featured on the following reading lists or Wikipedia pages:
    1. The Environment and Directed Technical Change (AER 2012) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:102:y:2012:i:1:p:131-66. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert). General contact details of provider: http://edirc.repec.org/data/aeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.