Scarcity, regulation and endogenous technical progress
(2011) Journal of Mathematical Economics — Vol. 47, n° 2, p. 186-199 (2011)
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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.
- Affiliations
Prairie View A&M University Department of Mathematics Houston Baptist University School of Business
Citations
Boucekkine, R., Hritonenko, N., & Yatsenko, Y. (2011). Scarcity, regulation and endogenous technical progress. Journal of Mathematical Economics, 47(2), 186-199. https://doi.org/10.1016/j.jmateco.2011.02.002 (Original work published 2011)