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A dynamic model of recycling with endogenous technological breakthrough

Gilles Lafforgue () and Luc Rouge

No 2018.14, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We present a general equilibrium growth model in which the use of a non renewable resource yields waste. Recycling waste produces materials of poor quality. These materials can be reused for production only once a dedicated R&D activity has made their quality reach a certain minimum threshold. The economy then switches to a fully recycling regime. We refer to this switch as the technological breakthrough. We analyze the optimal trajectories of the economy and interpret the Ramsey-Keynes and Hotelling conditions in this specific context. We characterize the determinants of the date of the breakthrough, which is endogenous, as well as the discontinuity in the variables' paths that is induced by this breakthrough. We show, in particular, that the availability of a recycling technology leads to an over-exploitation of the resource and possibly to lower levels of consumption before the breakthrough. We also find that the breakthrough can have a negative impact on utility over a finite period.

Keywords: Recycling; Non-renewable resource; Technical change; Growth (search for similar items in EconPapers)
JEL-codes: C61 O44 Q32 Q53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-env, nep-gro and nep-ino
Date: 2018-10
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http://faere.fr/pub/WorkingPapers/Lafforgue_Rouge_FAERE_WP2018.14.pdf First version, 2018 (application/pdf)
http://faere.fr/pub/WorkingPapers/Lafforgue_Rouge_FAERE_WP2018.14R.pdf Revised version, May 2019 (application/pdf)

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Journal Article: A dynamic model of recycling with endogenous technological breakthrough (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2018.14

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