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Promotion of Eco-Products and Environmental Regulation with Learning-by-Doing

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Abstract

This paper studies a dynamic model of eco-product planning, where an eco-product supplied by a single producer is differentiated from a conventional product generating negative externalities, and the production technology of the eco-product is characterized by learning-by-doing. The result states that the learning effect causes the eco-product to be more promoted and brings about more favorable outcomes on social welfare. This study also examines how the environmental regulation on the conventional product, associated with a price distortion, affects the promotion of the eco-product, consumer surplus, the single producer's profit, and negative externalities. It is shown that the impact of the environmental regulation is similar to that of a rise in the learning effect. Furthermore, whether or not the environmental regulation should be adopted is highly dependent on the degree of the learning effect. In the presence of a large learning potential, the environmental regulation may not only promote the eco-product effectively but also improve social welfare through intensifying the learning effect.

Suggested Citation

  • Makoto Kakinaka & Koji Kotani, 2006. "Promotion of Eco-Products and Environmental Regulation with Learning-by-Doing," Working Papers EMS_2006_07, Research Institute, International University of Japan.
  • Handle: RePEc:iuj:wpaper:ems_2006_07
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    More about this item

    Keywords

    eco-product; environmental regulation; product differentiation; learning-by-doing; optimal control;

    JEL classification:

    • 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

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