Green Paradox and Directed Technical Change
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Date
2013-07Type
- Working Paper
ETH Bibliography
yes
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Abstract
We borrow standard assumptions from the non-renewable-resource-taxation and from the directed-technical-change literatures, to take a full account of the incentives to perform R&D activities in a dirty-resource sector and in a clean-resource-substitute sector. We show that a gradual rise in the subsidies to clean R&D activities causes a less rapid resource extraction, because it enhances the long-run resource productivity. Our result contradicts the green-paradox conjecture that technical improvements in resource substitutes accelerate resource extraction. Sector-specific innovation activities are tantamount to competing economic projects; general equilibrium with several R&D sectors implies no-arbitrage conditions that give rise to not-so-intuitive results. Show more
Publication status
publishedJournal / series
CESifo Working PapersVolume
Publisher
CESifoSubject
Non-renewable resources; Directed technical change; Green paradox; Environmental policy; R&D subsidiesOrganisational unit
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
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ETH Bibliography
yes
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