Scarcity, regulation and endogenous technical progress

Raouf Boucekkine, Natali Hritonenko () and Yuri Yatsenko
Additional contact information
Natali Hritonenko: Prairie View A&M University, USA

No 2010010, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

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. We show that there exists a threshold level for the growth rate of the resource price above which the firm will collapse. Below this threshold, two important properties are found. In the long-run, a sustainable growth is possible at a growth rate which is independent of the resource price. In the short-run, not only will the firms respond to increasing resource price by increasing R&D on average, but they will also reduce capital expenditures and speed up the scrapping of older capital goods. Finally, we identify optimal intensive Vs extensive transitional growth regimes depending on the history of the firms.

Keywords: Vintage capital; technological progress; dynamic optimization; Sustainability; scarcity; environmental regulation (search for similar items in EconPapers)
JEL-codes: C61 D21 D92 O33 Q01 (search for similar items in EconPapers)
Pages: 41
Date: 2010-03-19
New Economics Papers: this item is included in nep-ene, nep-env, nep-ino and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Scarcity, regulation and endogenous technical progress (2011)
Working Paper: Scarcity, regulation and endogenous technical progress (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2010010

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