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Transition to Clean Technology

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Daron Acemoglu & Ufuk Akcigit & Douglas Hanley & William Kerr, 2014. "Transition to Clean Technology," PIER Working Paper Archive 14-044, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:14-044
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    References listed on IDEAS

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    More about this item

    Keywords

    carbon cycle; directed technological change; environment; innovation; optimal policy;
    All these keywords.

    JEL classification:

    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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