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The Environment and Directed Technical Change
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2012 (English)In: The American Economic Review, ISSN 0002-8282, E-ISSN 1944-7981, Vol. 102, no 1, 131-166 p.Article in journal (Refereed) Published
Abstract [en]

This paper introduces endogenous and directed technical change in a growth model with environmental constraints. The final good is produced from dirty and clean inputs. We show that: (i) when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation toward clean inputs; (ii) optimal policy involves both carbon taxes and research subsidies, avoiding excessive use of carbon taxes; (iii) delay in intervention is costly, as it later necessitates a longer transition phase with slow growth; and (iv) use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire.

Place, publisher, year, edition, pages
2012. Vol. 102, no 1, 131-166 p.
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URN: urn:nbn:se:su:diva-76326DOI: 10.1257/aer.102.1.131ISI: 000300411000005OAI: diva2:526861
4Available from: 2012-05-15 Created: 2012-05-10 Last updated: 2012-05-15Bibliographically approved

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