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Scarcity, regulation and endogenous technical progress

Author

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  • Raouf BOUCEKKINE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics and Core, Univerity of Glasgow, Department of Economics)

  • Natali HRITONENKO

    (Prairie View A&M University, USA)

  • Yuri YATSENKO

    (Houston Baptist University, USA)

Abstract

This paper studies to which extent a firm using a scarce resource input and facing environmental regulation, can still manage to have a sustainable growth of output and profits. The firm has a vintage capital technology with two complementary factors, capital and a resource input subject to quota, the latter being increasingly scarce through an exogenously rising price. The firm can scrap obsolete capital and invest in adoptive and/or innovative R&D resource-saving activities. We show that there exists a threshold level for the growth rate of the resource price above which the firm will collapse. Below this threshold, two important properties are found. In the long-run, a sustainable growth is possible at a growth rate which is independent of the resource price. In the short-run, not only will the firms respond to increasing resource price by increasing R&D on average, but they will also reduce capital expenditures and speed up the scrapping of older capital goods. Finally, we identify optimal intensive Vs extensive transitional growth regimes depending on the history of the firms.

Suggested Citation

  • Raouf BOUCEKKINE & Natali HRITONENKO & Yuri YATSENKO, 2010. "Scarcity, regulation and endogenous technical progress," LIDAM Discussion Papers IRES 2010010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2010010
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    19. N. Hritonenko & Yu. Yatsenko, 2005. "Turnpike and Optimal Trajectories in Integral Dynamic Models with Endogenous Delay," Journal of Optimization Theory and Applications, Springer, vol. 127(1), pages 109-127, October.
    20. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, "undated". "Optimal Firm Behavior under Environmental Constraints," Working Papers 2008_11, Business School - Economics, University of Glasgow.
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    Citations

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    Cited by:

    1. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2017. "Technological Progress, Employment and the Lifetime of Capital," Studies in Economic Theory, in: Kazuo Nishimura & Alain Venditti & Nicholas C. Yannelis (ed.), Sunspots and Non-Linear Dynamics, chapter 0, pages 305-337, Springer.
    2. Augeraud-Veron, Emmanuelle & Boucekkine, Raouf & Gozzi, Fausto & Venditti, Alain & Zou, Benteng, 2024. "Fifty years of mathematical growth theory: Classical topics and new trends," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    3. Raouf Boucekkine & David De la Croix & Omar Licandro, 2011. "Vintage Capital Growth Theory: Three Breakthroughs," Working Papers 565, Barcelona School of Economics.
    4. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2013. "Health, Work Intensity, and Technological Innovations," AMSE Working Papers 1320, Aix-Marseille School of Economics, France, revised Mar 2013.
    5. Thierry Bréchet & Natali Hritonenko & Yuri Yatsenko, 2013. "Adaptation and Mitigation in Long-term Climate Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(2), pages 217-243, June.
    6. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2014. "Optimal Investment in Heterogeneous Capital and Technology Under Restricted Natural Resource," Journal of Optimization Theory and Applications, Springer, vol. 163(1), pages 310-331, October.
    7. Kredler, Matthias, 2014. "Vintage human capital and learning curves," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 154-178.
    8. Raouf Boucekkine & Natali Hritonenko & Yuri Yatsenko, 2011. "Sustainable growth under pollution quotas: optimal R&D, investment and replacement policies," Working Papers halshs-00632887, HAL.

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    More about this item

    Keywords

    Vintage capital; technological progress; dynamic optimization; Sustainability; scarcity; environmental regulation;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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