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The Dixit-Stiglitz model of monopolistic competition is an important building block of a number of theories of economic growth. We discuss these theories in a general equilibrium framework with two types of research and development (R&D). First, new product lines can be introduced by incurring a sunk cost. Second, incumbent firms can raise productivity by inhouse investment in tacit knowledge. Special cases of the model include a dynamic version of the Dixit-Stiglitz model, the semi-endogenous growth model, the semi-endogenous growth model based on variety expansion, the endogenous growth model based on in-house R&D, and a combination of the latter two. It is shown that the intensity of competition play quite a different role in the various cases distinguished.4

We study how restricting CO 2 emissions affects resource prices and depletion over time. We use a Hotelling-style model with two nonrenewable fossil fuels that differ in their carbon content (e.g. coal and natural gas) and that are imperfect substitutes in final good production. We study both an unexpected constraint and an anticipated constraint. Both shocks induce intertemporal substitution of resource use. When emissions are unexpectedly restricted, it is cost-effective to use high-carbon resources relatively more (less) intensively on impact if this resource is relatively scarce (abundant). If the emission constraint is anticipated, it is cost-effective to use relatively more (less) of the low-carbon input before the constraint becomes binding, in order to conserve relatively more (less) of the high-carbon input for the period when climate policy is active in case the high-carbon resource is relatively scarce (abundant).JEL Classification: O13, Q31, Q43

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