Welfare and growth impacts of innovation policies in a small, open economy; an applied general equilibrium analysis

Bye, Brita; Fæhn, Taran; Heggedal, Tom‐Reiel

doi:10.1016/j.econmod.2009.04.002

Cited by 21 publications

(11 citation statements)

References 40 publications

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“…The model presented in this paper is an extension of that of Bye et al (2007) in three dimensions. Firstly, GHG emissions are included.…”

Section: General Featuresmentioning

confidence: 99%

“…Each patent represents a fixed entry cost for a capital variety firm, and gives that firm a monopoly on the production of a separate capital variety. Due to love of capital variety, the productivity of variety capital within final goods industries increases with the number of capital variety firms.The model presented in this paper is an extension of that of Bye et al (2007) in three dimensions. Firstly, GHG emissions are included.…”

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confidence: 99%

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Timing of innovation policies when carbon emissions are restricted: An applied general equilibrium analysis

Heggedal

Jacobsen

2011

Resource and Energy Economics

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Timing of innovation policies when carbon emissions are restricted: an applied general equilibrium analysis Abstract:This paper studies the timing of subsidies for environmental research and development (R&D) and how innovation policy is influenced by the costs of emissions. We use a dynamic computable general equilibrium (CGE) model with both general R&D and specific environmental R&D. We find two results that are important when subsidizing environmental R&D in order to target inefficiencies in the research markets. Firstly, the welfare gain from subsidies is larger when the costs of emissions are higher. This is because a high carbon tax increases the social (efficient) investment in environmental R&D, in excess of the private investment in R&D. Secondly, the welfare gain is greater when there is a falling time profile of the rate of subsidies for environmental R&D, rather than a constant or increasing profile. The reason is that the innovation externalities are larger in early periods.Keywords: Applied general equilibrium, endogenous growth, research and development, carbon emissions. JEL classification: E62, H31, O38, Q55Acknowledgement: The authors would like to thank Birger Strøm for excellent computer assistance in coding and calibrating the model. We would also like to thank Geir H. Bjertnaes, Brita Bye, Taran Faehn, Snorre Kverndokk, and Knut-Einar Rosendahl for useful comments. Finally, we gratefully acknowledge financial support from the Norwegian Research Council programs SAMSTEMT and RENERGI. One expects that a variety of policy measures will be needed to achieve the cuts in GHGs. AddressMost likely these will include a cap-and-trade system that gives a price to carbon emissions, like the European Trading Scheme, and a policy to improve clean energy technology like power production with carbon capture and storage (CCS). The most cost-efficient single policy to reduce emissions is an environmental policy that directly targets emissions, such as a tax or cap-and-trade system. 1 However, in the presence of induced technological change and market failures in R&D, a combination of environmental and innovation policies may be more cost effective.2 Jaffe et al. (2005) argue that market failures associated with environmental pollution interact with market failures associated with the innovation and diffusion of new technologies. These combined market failures provide a strong rationale for a portfolio of public policies to foster emissions reductions as well as the development and adoption of environmentally beneficial technology.Key arguments for subsidizing innovation activities are external spillovers from previous R&D and love of capital variety in demand, combined with inefficiencies arising from imperfect competition in the capital variety market.3 The market inefficiencies imply that the private returns from environmental R&D are lower than the social returns, which leads to underinvestment in environmental R&D. This underinvestment is the rationale for subsidizing R&D activity. Several environmental...

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“…The model presented in this paper is an extension of that of Bye et al (2007) in three dimensions. Firstly, GHG emissions are included.…”

Section: General Featuresmentioning

confidence: 99%

mentioning

confidence: 99%

Timing of innovation policies when carbon emissions are restricted: An applied general equilibrium analysis

Heggedal

Jacobsen

2011

Resource and Energy Economics

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“…Higher or lower values of these identical parameters will not change our conclusions. Earlier analyses confirm that the positive welfare effect of an R&D subsidy increases with the value of the spillover parameter and the mark-up factor in the markets for capital varieties, Bye et al (2009) and Heggedal and Jacobsen (2008).…”

Section: Directed Randd Supportmentioning

confidence: 77%

“…Intertemporal equilibrium requires fulfilment of two transversality conditions: the limit values of the total discounted values of net foreign debt and real capital must both be zero. The relative effects of the different policy analyses are independent of this assumption (see also Bye et al, 2009). …”

Section: B5 Consumer Behaviour and Balanced Growth Pathmentioning

confidence: 95%

Restricted carbon emissions and directed R&D support; an applied general equilibrium analysis

Bye

Jacobsen

2011

Energy Economics

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“…Based on the comparative OECD data, reports by Science, Technology and Innovation Council 2 emphasize, for instance, that the Canadian economy has been in a "low ranking" position in terms of performance in R&D in general; but especially reveals "low ranking" status in areas such as industry/business expenditure on R&D, percentage of total R&D 1 Applied work analyzing alternative growth promoting policies either through R&D or education based endogenous growth models within advanced country settings also include Diao et al (1999), Bye et al (2009) and Mattalia (2012).…”

Section: Growth With Respect To Randd and Human Capital Accumulation Inmentioning

confidence: 99%

Public policy and growth in Canada: An applied endogenous growth model with human and knowledge capital accumulation

Voyvoda

Yeldan

2015

Economic Modelling

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a b s t r a c t a r t i c l e i n f oEvidence suggests that the Canadian economy is over-shadowed with lagging productivity growth and that its innovation strategy lacks a market-oriented focus; and is unbalanced and biased. We study this problem with the aid of a dynamic general equilibrium model driven by analytics of endogenous growth and investigate the viable policy options and assess the interactions between knowledge driven growth, acquisition of human capital, and the role of strategic public policy for the Canadian economy. We study alternative public policies aimed at fostering the development of human capital (investment in education) and those at enhancing investments in innovation. Based on the re-allocation effects triggered by public subsidization policies on higher education versus industry/business R&D, our results corroborate that Canadian economy is falling short of its potential in (business) technological innovation. Our analyses further imply that the most welfare enhancing policy is to have a complementary mix of education and R&D subsidization designed to avoid the trade-offs that emerge in the short run.

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Welfare and growth impacts of innovation policies in a small, open economy; an applied general equilibrium analysis

Cited by 21 publications

References 40 publications

Timing of innovation policies when carbon emissions are restricted: An applied general equilibrium analysis

Timing of innovation policies when carbon emissions are restricted: An applied general equilibrium analysis

Restricted carbon emissions and directed R&D support; an applied general equilibrium analysis

Public policy and growth in Canada: An applied endogenous growth model with human and knowledge capital accumulation

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