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General Purpose Technologies and Energy Policy

Author

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  • Zon, Adriaan van
  • Kronenberg, Tobias

    (MERIT)

Abstract

We employ a general purpose technology model with endogenous stochastic growth to simulate the effects of different energy policy schemes. An R&D sector produces endogenous growth by developing radical and incremental technologies. These innovations result in blueprints for capital intermediates, which require raw capital and either carbon or non-carbon-based fuels. A carbon tax therefore affects not only the final production sector but also the R&D sector by making the development of non-carbon-based technologies more attractive. Due to path dependencies and possible lock-in situations, policy can have a significant long-term impact on the energy structure of the economy. Allowing for different elasticities of substitution between consumption and environmental quality, we examine the effects of different carbon policies on growth, environmental quality, and welfare. We find that an anti-carbon policy may reduce welfare initially, but in the long run there is a strong potential for a ‘double dividend’ due to faster growth and reduced pollution.

Suggested Citation

  • Zon, Adriaan van & Kronenberg, Tobias, 2005. "General Purpose Technologies and Energy Policy," Research Memorandum 011, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:umamer:2005011
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    File URL: https://www.merit.unu.edu/publications/rmpdf/2005/rm2005-011.pdf
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    References listed on IDEAS

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    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February.
    3. Jovanovic, Boyan & Rob, Rafael, 1990. "Long Waves and Short Waves: Growth through Intensive and Extensive Search," Econometrica, Econometric Society, vol. 58(6), pages 1391-1409, November.
    4. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
    5. Zon, Adriaan van & Yetkiner, I. Hakan, 2001. "An Endogenous Growth Model à la Romer with Embodied Energy-Saving Technological Change," Research Memorandum 031, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    6. Olsson, Ola, 2001. "Why Does Technology Advance in Cycles?," Working Papers in Economics 38, University of Gothenburg, Department of Economics.
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    Cited by:

    1. Edwin Garces & Tugrul Daim, 2012. "Impact of Renewable Energy Technology on the Economic Growth of the USA," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 3(3), pages 233-249, September.
    2. Kenneth Carlaw & Richard Lipsey, 2011. "Sustained endogenous growth driven by structured and evolving general purpose technologies," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 563-593, October.

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