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Economics of Endogenous Technical Change in CGE Models - The Role of Gains from Specialization

Computable general equilibrium models simulate the reaction of industries on carbon taxes. Their results differ strongly on the assumption of the underlying technologies. This paper compares two models and emphasizes the differences between their approaches to technology. The first model is the CITE model, which is the first model with endogenous growth based on gains from specialization so that growth dynamics result from investment incentives. The second model is a model with exogenous growth of endowments, which is the basis for many other CGE models. The results show that the CITE model unveils dynamics that cannot be obtained with the model based on exogenous growth. Reactions are stronger in the CITE model and industries need more time to approach the new balanced growth path.

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File URL: http://www.cer.ethz.ch/research/WP-10-130.pdf
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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 10/130.

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Length: 33 pages
Date of creation: Jun 2010
Date of revision:
Handle: RePEc:eth:wpswif:10-130
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  1. Stephen C Peck & Thomas J. Teisberg, 1992. "CETA: A Model for Carbon Emissions Trajectory Assessment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 55-78.
  2. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
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  5. 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.
  6. Jorge Niosi, 2008. "Technology, Development and Innovation Systems: An Introduction," Journal of Development Studies, Taylor & Francis Journals, vol. 44(5), pages 613-621.
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  8. Buonanno, Paolo & Carraro, Carlo & Galeotti, Marzio, 2003. "Endogenous induced technical change and the costs of Kyoto," Resource and Energy Economics, Elsevier, vol. 25(1), pages 11-34, February.
  9. Sabine Messner, 1997. "Endogenized technological learning in an energy systems model," Journal of Evolutionary Economics, Springer, vol. 7(3), pages 291-313.
  10. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  11. Löschel, Andreas, 2001. "Technological change in economic models of environmental policy: a survey," ZEW Discussion Papers 01-62, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Reyer Gerlagh & Bob van der Zwaan & Marjan Hofkes & Ger Klaassen, 2004. "Impacts of CO 2-Taxes in an Economy with Niche Markets and Learning-by-Doing," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(3), pages 367-394, July.
  13. Paolo Buonanno & Carlo Carraro & Efrem Castelnuovo & Marzio Galeotti, 2001. "Emission Trading Restrictions with Endogenous Technological Change," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 1(3), pages 379-395, July.
  14. Goulder, Lawrence H. & Schneider, Stephen H., 1999. "Induced technological change and the attractiveness of CO2 abatement policies," Resource and Energy Economics, Elsevier, vol. 21(3-4), pages 211-253, August.
  15. Boyd, Roy & Uri, Noel D., 1991. "An assessment of the impacts of energy taxes," Resources and Energy, Elsevier, vol. 13(4), pages 349-379, December.
  16. Sandilands, Roger J., 2000. "Perspectives on Allyn Young in Theories of Endogenous Growth," Journal of the History of Economic Thought, Cambridge University Press, vol. 22(03), pages 309-328, September.
  17. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
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