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Knowledge diffusion, endogenous growth, and the costs of global climate policy

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  • Bretschger, Lucas
  • Lechthaler, Filippo
  • Rausch, Sebastian
  • Zhang, Lin

Abstract

This paper examines the effects of knowledge diffusion on growth and the costs of climate policy. We develop a general equilibrium model with endogenous growth which represents knowledge diffusion between sectors and regions. Knowledge diffusion depends on accessibility and absorptive capacity which we estimate econometrically using patent and citation data. Knowledge diffusion leads to a “greening” of economies boosting productivity of “clean” carbon-extensive sectors. Knowledge diffusion lowers the costs of global climate policy by about 90% for emerging countries (China) and 20% for developed regions (Europe and USA), depending on the substitutability between different knowledge types.

Suggested Citation

  • Bretschger, Lucas & Lechthaler, Filippo & Rausch, Sebastian & Zhang, Lin, 2017. "Knowledge diffusion, endogenous growth, and the costs of global climate policy," European Economic Review, Elsevier, vol. 93(C), pages 47-72.
  • Handle: RePEc:eee:eecrev:v:93:y:2017:i:c:p:47-72
    DOI: 10.1016/j.euroecorev.2016.11.012
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    More about this item

    Keywords

    Climate policy; Endogenous growth; Knowledge diffusion; General equilibrium modeling;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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