Scarcity, regulation and endogenous technical progress |
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Authors: | Raouf Boucekkine Natali Hritonenko Yuri Yatsenko |
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Affiliation: | aIRES and CORE, Université catholique de Louvain, Belgium;bGREQAM, Université Aix-Marseille II, France;cPrairie View A&M University, USA;dHouston Baptist University, USA |
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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. Within this realistic framework, we first characterize long-term growth regimes driven by scarcity (induced-innovation) vs. long-term growth regimes driven by quota regulation (Porter-like innovation). More importantly, we study the interaction between scarcity and quota regulation. In particular, we show that there exists a threshold level for the growth rate of the resource price above which the Porter mechanism is killed while the scarcity-induced growth regime may emerge. Symmetrically, we also find that there must exist a threshold value for the environmental quota under which the growth regime induced by scarcity vanishes while the Porter-like growth regime may survive. |
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Keywords: | JEL classification: C61 D21 D92 O33 Q01 |
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