Scarcity, regulation and endogenous technical progress

Raouf Boucekkine (), Natali Hritonenko and Yuri Yatsenko

Journal of Mathematical Economics, 2011, vol. 47, issue 2, 186-199

Abstract: This paper studies to which extent a firm using a scarce resource input and facing environmental regulation can still manage to have a sustainable growth of output and profits. The firm has a vintage capital technology with two complementary factors, capital and a resource input subject to quota, the latter being increasingly scarce through an exogenously rising price. The firm can scrap obsolete capital and invest in adoptive and/or innovative R&D resource-saving activities. Within this realistic framework, we first characterize long-term growth regimes driven by scarcity (induced-innovation) vs. long-term growth regimes driven by quota regulation (Porter-like innovation). More importantly, we study the interaction between scarcity and quota regulation. In particular, we show that there exists a threshold level for the growth rate of the resource price above which the Porter mechanism is killed while the scarcity-induced growth regime may emerge. Symmetrically, we also find that there must exist a threshold value for the environmental quota under which the growth regime induced by scarcity vanishes while the Porter-like growth regime may survive.

Keywords: Vintage; capital; Technological; progress; Dynamic; optimization; Sustainability; Scarcity; Environmental; regulation (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Scarcity, regulation and endogenous technical progress (2011)
Working Paper: Scarcity, regulation and endogenous technical progress (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:47:y:2011:i:2:p:186-199

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