IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/21955.html

Innovation, Business Cycles, and the Climate Transition

Author

Listed:
  • Känzig, Diego
  • Konradt, Maximilian
  • Wang, Lixing
  • Zhang, Donghai

Abstract

We study how business cycle fluctuations shape the pace and direction of innovation. Non-green innovation is procyclical, while green innovation is countercyclical, both over the cycle and in response to economic shocks. We explain this divergence in a dynamic general equilibrium model with endogenous green and non-green innovation. Green patents derive more value from distant profits, making green innovation less sensitive to short-run fluctuations. Endogenous innovation costs reinforce this mechanism, making green and non-green innovation effective substitutes. Evidence from market-implied patent valuations and scientist earnings supports the mechanism. The model implies larger and greener effects of innovation subsidies during downturns.

Suggested Citation

  • Känzig, Diego & Konradt, Maximilian & Wang, Lixing & Zhang, Donghai, 2026. "Innovation, Business Cycles, and the Climate Transition," CEPR Discussion Papers 21955, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21955
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP21955
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    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:cpr:ceprdp:21955. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.