EnvironTechChange

EnvironTechChange - Technological Change and the...

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Technological Change and the Environment Adam B. Jaffe, Richard G. Newell, and Robert N. Stavins November 2001 • Discussion Paper 00–47REV Resources for the Future 1616 P Street, NW Washington, D.C. 20036 Telephone: 202–328–5000 Fax: 202–939–3460 Internet: http://www.rff.org © 2000 Resources for the Future. All rights reserved. No portion of this paper may be reproduced without permission of the authors. Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review or editorial treatment. .
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Technological Change and the Environment Adam B. Jaffe, Richard G. Newell, and Robert N. Stavins Abstract Environmental policy discussions increasingly focus on issues related to technological change. This is partly because the environmental consequences of social activity are frequently affected by the rate and direction of technological change, and partly because environmental policy interventions can themselves create constraints and incentives that have significant effects on the path of technological progress. This paper, prepared as a chapter draft for the forthcoming Handbook of Environmental Economics (North-Holland/Elsevier Science), summarizes current thinking on technological change in the broader economics literature, surveys the growing economic literature on the interaction between technology and the environment, and explores the normative implications of these analyses. We begin with a brief overview of the economics of technological change, and then examine theory and empirical evidence on invention, innovation, and diffusion and the related literature on the effects of environmental policy on the creation of new, environmentally friendly technology. We conclude with suggestions for further research on technological change and the environment. Key Words: technological change, induced innovation, environment, policy JEL Classification Numbers: O30, Q00
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Table of Contents 1. Introduction. ............................................................................................................................................ 1 2. Fundamental Concepts in the Economics of Technological Change. ...................................................... 3 2.1. Schumpeter and the Gale of Creative Destruction. .............................................................................. 3 2.2. Production Functions, Productivity Growth, and Biased Technological Change. ............................... 5 2.3. Technological Change and Endogenous Economic Growth. ............................................................... 9 3. Invention and Innovation. ...................................................................................................................... 10 3.1. The induced innovation approach. ..................................................................................................... 11 3.1.1. Neoclassical induced innovation. ............................................................................................... 11 3.1.2. Market failures and policy responses. ........................................................................................ 13 3.1.3. Empirical evidence on induced innovation in pollution abatment and energy conservation . ....18 3.2. Effects of instrument choice on invention and innovation. ................................................................ 21 3.2.1. Categories of environmental policy instruments and criteria for comparison . .......................... 22 3.2.2. Theoretical Analyses. ................................................................................................................. 25 3.2.3. Empirical Analyses. ................................................................................................................... 29 3.3. Induced innovation and optimal environmental policy. ..................................................................... 32 3.4. The evolutionary approach to innovation . ......................................................................................... 35 3.4.1. Porter’s “win-win” hypothesis. .................................................................................................. 35 4. Diffusion . .............................................................................................................................................. 41 4.1. Microeconomics of Diffusion. ........................................................................................................... 41 4.1.1. Increasing returns and technology lock-in. ................................................................................ 44 4.2. Diffusion of green technology. .......................................................................................................... 49 4.2.1. Effects of resource prices and technology costs . ....................................................................... 51 4.2.2. Effects of inadequate information, uncertainty, and agency problems .
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This note was uploaded on 10/23/2010 for the course ECON 101 taught by Professor Buddin during the Fall '08 term at UCLA.

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EnvironTechChange - Technological Change and the...

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