American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Environment and Directed Technical Change
American Economic Review
vol. 102,
no. 1, February 2012
(pp. 131–66)
Abstract
This paper introduces endogenous and directed technical change in a growth model with environmental constraints. The final good is produced from "dirty" and "clean" inputs. We show that: (i) when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation toward clean inputs; (ii) optimal policy involves both "carbon taxes" and research subsidies, avoiding excessive use of carbon taxes; (iii) delay in intervention is costly, as it later necessitates a longer transition phase with slow growth; and (iv) use of an exhaustible resource in dirty input production helps the switch to clean innovation under laissez-faire. (JEL O33, O44, Q30, Q54, Q56, Q58)Citation
Acemoglu, Daron, Philippe Aghion, Leonardo Bursztyn, and David Hemous. 2012. "The Environment and Directed Technical Change." American Economic Review, 102 (1): 131–66. DOI: 10.1257/aer.102.1.131Additional Materials
JEL Classification
- O33 Technological Change: Choices and Consequences; Diffusion Processes
- O44 Environment and Growth
- Q30 Nonrenewable Resources and Conservation: General
- Q54 Climate; Natural Disasters; Global Warming
- Q56 Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
- Q58 Environmental Economics: Government Policy