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Induced technical change, adjustment costs and environmental policy modelling

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  • Francesco Ferrante

Abstract

In this paper I develop a neo-Schumpeterianmodel of induced technical change where firms/polluters determine their effort in environment-saving technical change. Two technological scenarios are distinguished depending on whether basic research is endogenous or exogenous. Building on this analytical setting, I show that in the presence of non-linear adjustment costs the choice of instruments of environmental policy should be tailored to the actual characteristics of the firms'/polluters' technological environment. Moreover, this analysis confirms that searching for efficient environmental policy mixes is more rewarding than focusing on single instruments, notably pollution taxation.

Suggested Citation

  • Francesco Ferrante, 1998. "Induced technical change, adjustment costs and environmental policy modelling," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 649-665.
    • Handle: RePEc:taf:applec:v:30:y:1998:i:5:p:649-665
    DOI: 10.1080/000368498325642
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    References listed on IDEAS

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    1. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    2. Francesco Ferrante, "undated". "Cournot Competition, Technical Change and the Optimal Control of Pollution," Discussion Papers 95/3, Department of Economics, University of York.
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    Cited by:

    1. Naqvi, Asjad & Stockhammer, Engelbert, 2018. "Directed Technological Change in a Post-Keynesian Ecological Macromodel," Ecological Economics, Elsevier, vol. 154(C), pages 168-188.
    2. Srivastava, Lorie & Batie, Sandra S. & Norris, Patricia E., 1999. "The Porter Hypothesis, Property Rights, And Innovation Offsets: The Case Of Southwest Michigan Pork Producers," 1999 Annual meeting, August 8-11, Nashville, TN 21515, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Kurt Kratena & Michael Wüger, 2003. "The Role of Technology in Interfuel Substitution: A Combined Cross-Section and Time Series Approach," WIFO Working Papers 204, WIFO.

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