Who Should Drive Green Technology Transitions in Developing Countries: State-Owned Enterprises versus Private Firms

Prudence Zowadan Dato, Frank Krysiak, Christian Nolde and Govinda R. Timilsina

No 10506, Policy Research Working Paper Series from The World Bank

Abstract: Green technologies, such as renewable energy, often require adaptation to local conditions, such as high humidity, high altitudes or the specifics of a country’s infrastructure, to achieve a maximal technical efficiency and a long lifetime of investments. This poses a problem for green technology transitions, as adaptations usually imply protected intellectual property rights and thus market imperfections that can lead to higher prices and thereby a lower uptake of the green technology. An alternative could be to use state-owned enterprises to adapt and promote green technologies, such as public utilities, which are more easily steered toward pursuing societal objectives. However, many empirical studies find state-owned enterprises to be less efficient. This theoretical contribution investigates the question whether a green technology transition that requires research and development is better driven by private firms or state-owned enterprises. The paper adapts a model to this setting, derives possible market outcomes from this model, investigates research and development and production decisions of private firms and a state-owned enterprise, and compares the welfare implications of the two options. The results show that there are cases where the cost inefficiency of the state-owned enterprise dominates (for example, if competition of directly importing firms reduces possible markups of private innovating firms), but also cases where a state-owned enterprise is the preferred choice (for example, if several private firms would adapt the technology, causing over-innovation). Most importantly, this is not solely a question of comparing costs, but rather of comparing market outcomes. For example, the use of a state-owned enterprise can avoid the often found problem of overinvestment in research and development by private firms and, in many cases, a state-owned enterprise will induce a wider diffusion of the green technology.

Date: 2023-06-27
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://documents.worldbank.org/curated/en/09934050 ... f370d4a9425ee183.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://documents.worldbank.org/curated/en/099340506272328622/pdf/IDU02c6bd7a505763045de0bf370d4a9425ee183.pdf [302 Found]--> http://documents1.worldbank.org/curated/en/099340506272328622/pdf/IDU02c6bd7a505763045de0bf370d4a9425ee183.pdf [301 Moved Permanently]--> https://documents1.worldbank.org/curated/en/099340506272328622/pdf/IDU02c6bd7a505763045de0bf370d4a9425ee183.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:10506

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().