The Environment and Directed Technical Change

Daron Acemoglu, Philippe Aghion, Leonardo Bursztyn and David Hemous

American Economic Review, 2012, vol. 102, issue 1, 131-66

Abstract: 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. (JEL O33, O44, Q30, Q54, Q56, Q58)

Date: 2012
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Related works:
Working Paper: The Environment and Directed Technical Change (2011)
Working Paper: The Environment and Directed Technical Change (2010)
Working Paper: The Environment and Directed Technical Change (2010)
Working Paper: The Environment and Directed Technical Change (2010)
Working Paper: The Environment and Directed Technical Change (2009)
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