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Induced Technological Change under Technology Competition

1st Person: Gerlagh, Reyer
Type of Publication: Paper
Language: English
Published: Fondazione Eni Enrico Mattei (FEEM) 2003
Series: Nota di Lavoro
Keywords: Technischer Fortschritt
Innovationswettbewerb
Ökosteuer
Partielles Gleichgewicht
Theorie
Technological change
Technology competition
Partial equilibrium
Theory
Online: https://www.econstor.eu/bitstream/10419/118032/1/NDL2003-005.pdf
Description: 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.

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