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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
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.1.131
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    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

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