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Backstop Technology Adoption

Author

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  • Matti Liski
  • Pauli Murto

Abstract

We consider how efficient markets adopt technologies that reduce dependence on volatile factors such as oil. We find a relationship between volatility and technology overlap: new technology entry rate exceeds old technology exit rate under sufficient uncertainty. From this follows that efficient adoption is characterized by prolonged coexistence of alternative technologies and that uncertainty increasingly propagates from input to output market despite the declining use of the volatile factor in production. The properties depend on (i) the option to remain idle rather than exit, (ii) heterogeneity in factor supply, and (iii) factor market volatility

Suggested Citation

  • Matti Liski & Pauli Murto, 2006. "Backstop Technology Adoption," 2006 Meeting Papers 260, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:260
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    File URL: http://hkkk.fi/~murto/bta.pdf
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    Cited by:

    1. Paschen, Marius & Meier, Felix & Rickels, Wilfried, 2022. "Accounting for terrestrial and marine carbon sink enhancement," Kiel Working Papers 2204, Kiel Institute for the World Economy (IfW Kiel), revised 2022.

    More about this item

    Keywords

    technology adoption; factor markets; uncertainty; irreversible investment; energy;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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