Innovation and environmental policy: clean vs. dirty technical change

Maria A Cunha-e-Sa, Alexandra Leitão () and Ana Reis

Nova SBE Working Paper Series from Universidade Nova de Lisboa, Nova School of Business and Economics

Abstract: We study a two sector endogenous growth model with environmental quality with two goods and two factors of production, one clean and one dirty. Technological change creates clean or dirty innovations. We compare the laissez-faire equilibrium and the social optimum and study first- and second-best policies. Optimal policy encourages research toward clean technologies. In a second-best world, we claim that a portfolio that includes a tax on the polluting good combined with optimal innovation subsidy policies is less costly than increasing the price of the polluting good alone. Moreover, a discriminating innovation subsidy policy is preferable to a non-discriminating one.

Keywords: Pollution; endogenous growth; innovation; environmental policy; laissez-faire equilibrium; optimal equilibrium; discriminating vs. non-discriminating; subsidies to R&D (search for similar items in EconPapers)
JEL-codes: H23 O3 O41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:unl:unlfep:wp548

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