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Transition to Clean Technology

Listed author(s):
  • Daron Acemoglu

    ()

    (Department of Economics, MIT and CIFAR)

  • Ufuk Akcigit

    ()

    (Department of Economics, University of Pennsylvania)

  • Douglas Hanley

    ()

    (Department of Economics, University of Pittsburgh)

  • William Kerr

    ()

    (Harvard Business School, Harvard University)

We develop a microeconomic model of endogenous growth where clean and dirty technologies complete in production and innovation - in the sense that research can be directed to either clean or dirty technologies. If dirty technologies are more advanced to start with, the potential transition to clean technology can be difficult both because clean research must climb several rungs to catch up withdirty technology and because this gap discourages research effort directed towards clean technologies. Carbon taxes and research subsidies may nonetheless encourage production and innovation in clean technologies, though the transition will typically be slow. We characterize certain general properties of the transition path from dirty to clean technology. We then estimate the model using a combination of regression analysis on the relationship between R&D and patents, and simulated method of moments using microdata on employment, production, R&D, firm growth, entry and exit from the US energy sector. The model’s quantitative implications match a range of moments not targeted in the estimation quite well. We then characterize the optimal policy path implied by the model and our estimates. Optimal policy makes heavy use of research subsidies as well as carbon taxes. We use the model to evaluate the welfare consequences of a range of alternative policies.

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File URL: http://economics.sas.upenn.edu/system/files/14-044.pdf
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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 14-044.

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Length: 53 pages
Date of creation: 03 Dec 2014
Handle: RePEc:pen:papers:14-044
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  7. Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William Kerr, 2016. "Transition to Clean Technology," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 52-104.
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  12. Delis, Manthos D. & Hasan, Iftekhar & Tsionas, Efthymios G., 2015. "Firms’ risk endogenous to strategic management choices," Research Discussion Papers 16/2015, Bank of Finland.
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  19. John Hassler & Per Krusell, 2012. "Economics And Climate Change: Integrated Assessment In A Multi-Region World," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 974-1000, October.
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  21. Boele Bonthuis & Valerie Jarvis & Juuso Vanhala, 2016. "Shifts in euro area Beveridge curves and their determinants," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-17, December.
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  24. repec:bof:bofrdp:urn:nbn:fi:bof-201508211363 is not listed on IDEAS
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