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Global warming and technical change: Multiple steady-states and policy options

Author

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  • Bondarev, Anton
  • Greiner, Alfred

Abstract

In this paper we develop an economic growth model that includes anthropogenicclimate change. We include a publicly funded research sector that creates new technologies and simultaneously expands the productivities of existing technologies. The environment is affected by R&D activities both negatively, through the increase of output from productivity growth, as well as positively as new technologies are less harmful for the environment. We find that there may exist two different steadystates of the economy, depending on the amount of research spending: one with less new technologies being developed and the other with more technologies. Thus, a lock-in effect may arise that, however, can be overcome by raising R&D spending sufficiently such that the steady-state becomes unique. We derive the combinations of fiscal policy instruments for which that can be achieved and we study the implications for the economy and for the environment. In particular, the double dividend hypothesis may hold only under some specific conditions.

Suggested Citation

  • Bondarev, Anton & Greiner, Alfred, 2018. "Global warming and technical change: Multiple steady-states and policy options," Working papers 2018/03, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2018/03
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    File URL: https://edoc.unibas.ch/61296/1/20180306091157_5a9e4d4d37033.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Anton Bondarev, 2012. "The long-run dynamics of product and process innovations for a multi-product monopolist," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(8), pages 775-799, November.
    4. Kalkuhl, Matthias & Edenhofer, Ottmar & Lessmann, Kai, 2012. "Learning or lock-in: Optimal technology policies to support mitigation," Resource and Energy Economics, Elsevier, vol. 34(1), pages 1-23.
    5. Bondarev, Anton & Greiner, Alfred, 2017. "Technology lock-in with horizontal and vertical innovations through limited R&D spending," Working papers 2017/04, Faculty of Business and Economics - University of Basel.
    6. Greiner, Alfred & Semmler, Willi, 2005. "Economic growth and global warming: A model of multiple equilibria and thresholds," Journal of Economic Behavior & Organization, Elsevier, vol. 57(4), pages 430-447, August.
    7. Pietro Peretto & Michelle Connolly, 2007. "The Manhattan Metaphor," Journal of Economic Growth, Springer, vol. 12(4), pages 329-350, December.
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    More about this item

    Keywords

    Climate change; doubly-differentiated R&D; double dividend; fiscal policy instruments; technology lock-in;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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