Reconstructing growth theory: A survey

Summary Recent developments in the theory of economic growth aim at endogenising long-run growth. The paper discusses models in which technological change arises as a by-product of certain economic activities as well as models where some economic actions are explicity aimed at technological improvements. In addition, separate sections are devoted to the specific reconstruction of growth theory by M. Scott and models explaining stages of economic development. For expositional purposes the algebra is kept to a minimum. The focus is on theoretical models for a closed economy. Empirical work is only mentioned in passing.We are indebted to S. Kuipers, F. van der Ploeg and A. van Schaik for useful comments on an earlier version.     

Climate policy and the optimal extraction of high‐ and low‐carbon fossil fuels

Abstract. We study how restricting CO₂ emissions affects resource prices and depletion over time. We use a Hotelling‐style model with two non‐renewable fossil fuels that differ in their carbon content (e.g., coal and natural gas) and in addition are imperfect substitutes in final good production. We show that an economy facing a CO₂ flow‐constraint may substitute towards the relatively dirty input. As the economy tries to maximize output per unit of emissions it is not only carbon content that matters: productivity matters as well. With an announced constraint the economy first substitutes towards the less productive input such that more of the productive input is available when constrained. Preliminary empirical results suggest that it is cost‐effective to substitute away from dirty coal to cleaner oil or gas, but to substitute from natural gas towards the dirtier input oil.     

Worktime Demands and Work-Family Interference: Does Worktime Control Buffer the Adverse Effects of High Demands?

This study examined whether worktime control buffered the impact of worktime demands on work–family interference (WFI), using data from 2,377 workers from various sectors of industry in The Netherlands. We distinguished among three types of worktime demands: time spent on work according to one’s contract (contractual hours), the number of hours spent on overtime work (overtime hours), and the number of hours spent on commuting (commuting hours). Regarding worktime control, a distinction was made between having control over days off and vacations (leave control) and having control over starting and finishing times (flextime). These three worktime demands were expected to have separate as well as joint effects on WFI, whereas worktime control should buffer these adverse effects of worktime demands on WFI. Stepwise regression analyses showed that working high numbers of contractual and overtime hours was indeed associated with high WFI. Further, worktime control indeed made a difference in terms of WFI: whereas leave control contributed directly to lower WFI, flextime buffered the adverse effects of long contractual workhours. Our results suggest that very long working days should be prevented, and that worktime control may be a powerful tool to help workers maintaining a good work–family balance.     

Climate Policy with Tied Hands: Optimal Resource Taxation Under Implementation Lags

In this paper we present a Stackelberg differential game to study the dynamic interaction between a polluting firm and a regulator who sets pollution limits overtime. At each time, the firm settles emissions taking into account the fine for non-compliance with the pollution limit, and balances current costs of investments in a capital stock which allows for future emission reductions. We derive two main results. First, we show that the optimal pollution limit decreases as the capital stock increases, while both emissions and the level of non-compliance decrease. Second, we find that offering fine discounts in exchange for firm’s capital investment is socially desirable. We numerically obtain the optimal value of such discount, which crucially depends on the severity of the fine. In the limiting scenario with a very large severity of the fine, the optimal discount implies that no penalties are levied, since the firm shows adequate adaptation progress through capital investment.     

Does a Recession Call for Less Stringent Environmental Policy? A Partial-Equilibrium Second-Best Analysis

This paper analyses second-best optimal environmental policy responses to real and financial shocks in a two-period partial equilibrium model with heterogeneous firms, an environmental externality, and credit constraints. We show that, to alleviate credit constraints and encourage investment, the second-best optimal emission tax falls short of marginal emission damages. The optimal response to shocks depends on how the shock affects the size of the environmental and credit market failures and the effectiveness of the tax in alleviating these market failures. Under mildly restrictive assumptions on functional forms, the optimal response to a (persistent) negative productivity shock or a tightening of credit is to reduce the emission tax. Our results are informative for how climate change policy should optimally change with the business cycle.     

Sustainable Resource Use and Economic Dynamics

We argue that the sustainable use of natural resources has to be placed in a dynamic perspective, both in theoretical modelling and in applied research. This can be achieved by applying endogenous growth theory and other recent advances in dynamic theory. In this paper we discuss five contributions that combine the topics of natural resource use and economic dynamics. In particular, we show the common features of these contributions, thereby providing an overview of a very active and promising research area.      

Enige aspecten van het vraagstuk der inflatiebestrijding; kritische kanttekeningen bij een belangwekkend boek

Ohne Zusammenfassung     

Growth, Competition and Welfare

The impact of competition on growth and welfare is analysed by developing a model in which the number of firms, profit margins and innovation rates are endogenous. Different regimes of oligopolistic competition are distinguished. The tougher the price competition, the lower the profit margins for a given rate of concentration. This reduces the number of firms and product variety in a free entry equilibrium. Consequently, tougher competition implies larger firm size and higher rates of innovation since new technologies can be applied in a larger market. Oligopolistic pricing leads to underinvestment in firm-specific knowledge, even if inter-firm knowledge spillovers are neglected.     

CARBON LOCK‐IN: THE ROLE OF EXPECTATIONS

We argue that expectations about future energy use affect the transition from fossil to renewables because of an interaction between innovation and resource scarcity. This article presents a model of directed technical change to study this interaction. We find that fossil‐saving technical change erodes the incentives to implement renewables. Conversely, the anticipation of a transition to renewables diminishes the incentives to invest in fossil technology. As a result, two equilibria may arise, one with a transition to renewables and with low fossil efficiency and one without renewables and with high fossil efficiency. Expectations determine which equilibrium arises.