The Social Power of Spillover Effects: Educating Against Environmental Externalities

Andri Brenner ()
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Andri Brenner: University of Potsdam, MCC Berlin

No 35, CEPA Discussion Papers from Center for Economic Policy Analysis

Abstract: Economists are worried that the lack of property rights to natural capital goods jeopardizes the sustainability of the economic growth miracle that has existed since industrialization. This article questions their position. A vertical innovation model with a portfolio of technologies for abatement, adaptation, and general (Harrod-neutral) technology reveals that environmental damage spillovers have a comparable effect on research profits as technology spillovers so that the social costs of depleting public natural capital are internalized. As long as there is free access to information and technology, growth is sustainable and the allocation of research efforts among alternative technologies is socially optimal. While there still is a need to address externalities from monopolistic research markets, no environmental policy is necessary. These results suggest that environmental externalities may originate in restricted access to information and technology, demonstrating that (i) information has a similar effect as an environmental tax and (ii) knowledge and technology transfers have an impact comparable to that of subsidies for research in green technology.

Keywords: endogenous growth; horizontal innovation; sustainability (search for similar items in EconPapers)
JEL-codes: O30 O44 Q55 Q56 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-cse, nep-ene, nep-env and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:pot:cepadp:35

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