Green Innovation and Economic Growth in a North-South Model
If one region of the world switches its research effort from dirty to clean technologies, will other regions follow To investigate this question, this paper builds a North-South model that combines insights from directed technological change and qu...
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| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099550306212220047/IDU08b797f9305e58044070abf806c5e8be01595 http://hdl.handle.net/10986/37591 |
| Summary: | If one region of the world switches
its research effort from dirty to clean technologies, will
other regions follow To investigate this question, this
paper builds a North-South model that combines insights from
directed technological change and quality-ladder endogenous
growth models with business-stealing innovations. While
North represents the region with climate ambitions, both
regions have researchers choosing between clean and dirty
applications, and the resulting technologies are traded.
Three main results emerge: (i) In the long-run, if
North's research and development (R&D) sector is
large enough, researchers in South will follow the switch
from dirty to clean R&D in North, motivated by the
growing value of clean markets. (ii) If the two regions
direct research effort toward different sectors and the
outputs of the two sectors are gross substitutes, then the
long-run growth rates in both regions are lower than if the
global research effort were invested in one sector. (iii) If
North's government induces its researchers to switch to
clean R&D through clean technology subsidies, the
welfare-maximizing choice for South is to ensure that all of
its researchers switch too, unless the social discount rate
is high. The last result is true even if South's
R&D sector is large. |
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