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Technology diffusion under contraction and convergence: A CGE analysis of China

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  • Hübler, Michael

Abstract

This paper introduces a mechanism of international technology diffusion via FDI and imports into recursive-dynamic CGE modeling for climate policy analysis. As a novel feature, the mechanism distinguishes spillovers from foreign do domestic capital within sectors and across sectors within the production chain. The paper applies the mechanism to the analysis of a contraction and convergence type climate policy focusing on China. The mechanism of international technology diffusion leads to an increase in China's energy productivity an a decline in China's economic growth rates in a convergence process. In this case, inter-regional emissions trading could (more than) compensate China's welfare losses due to climate policy. Otherwise, China's welfare losses due to climate policy could be significant.

Suggested Citation

  • Hübler, Michael, 2011. "Technology diffusion under contraction and convergence: A CGE analysis of China," Energy Economics, Elsevier, vol. 33(1), pages 131-142, January.
  • Handle: RePEc:eee:eneeco:v:33:y:2011:i:1:p:131-142
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