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Valente, Simone
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Valente, Simone
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Valente, Simone
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- PublicationCarbon leakage revisited : unilateral climate policy under directed technical change(European Association of Environmental and Resource Economists, 2005)
; This paper analyzes the consequences of unilateral climate policy in the presence of directed technical change. We develop a dynamic two-country model in which two otherwise identical countries differ in their environmental policy: one of the countries enforces a (binding) cap on emissions while the other does not. Focusing on carbon leakage, we show how allowing for directed technical change significantly modifies the results obtained otherwise231 - PublicationHicks meets Hotelling : the direction of technical change in capital–resource economiesWe analyze a two-sector growth model with directed technical change where man-made capital and exhaustible resources are essential for production. The relative profitability of factor-specific innovations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that any balanced growth equilibrium features purely resource-augmenting technical change. This result is compatible with alternative specifications of preferences and innovation technologies, as it hinges on the interplay between productive efficiency in the final sector, and the Hotelling rule characterizing the efficient depletion path for the exhaustible resource. Our result provides sound micro-foundations for the broad class of models of exogenous/endogenous growth where resource-augmenting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.
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