Does Technical Progress Increase Long-Run Welfare?

Stefano Bartolini and Luigi Bonatti ()

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: We study an economy where households invest in capital and cause negative externalities on a renewable resource entering their utility function. There are also endogenous technical progress boosting labor productivity and the possibility of investing in resource-saving technical progress. Within this setup, we compare two regimes. Under “laissez-faire”, households ignore the externalities they cause: the resource is asymptotically depleted and perpetual economic growth is generated, but households’ welfare remains stagnant in the long run. Under an authority imposing the internalization of the externalities, long-run growth tends to be depressed but the resource is preserved and households’ welfare increases forever.

Keywords: Endogenous growth; Induced technical progress; Market failures; Externalities (search for similar items in EconPapers)
JEL-codes: H23 O30 O41 Q55 (search for similar items in EconPapers)
Date: 2004-09
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Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:435

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