Induced Technological Change under Technology Competition

Reyer Gerlagh

No 2003.5, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We develop a partial one-sector model with capital, natural resources, and labor as production factors, and endogenous technological change through research. Production exhibits increasing returns to scale. We compare the response of output and resource use to a change in resource prices with and without induced technological change (ITC). It is shown that induced technological change is insignificant in reducing resource use when there is one representative technology and output demand is inelastic to prices. In contrast, substantial gains from ITC appear when we allow for two competing technologies that can be employed for production, while these technologies are good substitutes. Also, in case of two technologies, conditions are specified under which multiple balanced growth paths exist, and it is shown that because of ITC, a temporary resource tax can lock out the economy from a resource intensive path and lock in to a resource extensive path.

Keywords: Induced technological change; environmental taxes; partial equilibrium (search for similar items in EconPapers)
JEL-codes: H23 O31 O41 Q42 Q43 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-ino and nep-pbe
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2003.5

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