Learning by Doing and International Interaction in Environmental Policies

Furukawa, Yuichi and Takarada, Yasuhiro (2013): Learning by Doing and International Interaction in Environmental Policies.

Abstract

This paper considers the impact of differences in endogenous technological change between two countries on global pollution emissions under international strategic interaction in environmental policies. A country that initially has a dirty technology (an environmentally lagging country) reduces more pollution emissions by imposing a higher rate of pollution reduction per unit of the emission, although it may generate larger total emissions. The more a country reduces pollutants, the more it learns how to produce in an environmentally friendly manner at low cost. The main finding is that an environmentally lagging country's technology may continue to advance through a learning-by-doing effect until it exceeds the environmental friendliness of a leading country that initially had the cleanest technology. Whether a country eventually becomes an environmentally leading country depends on the country size and its awareness of environmental quality.

• Item Type: MPRA Paper
• Language: English
• Keywords: Environmental policy; leapfrogging; learning-by-doing; strategic interaction; technological change; transboundary pollution
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O33 - Technological Change: Choices and Consequences ; Diffusion Processes; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O44 - Environment and Growth

References

Acemoglu, Daron, Philippe Aghion, Leonardo Bursztyn, and David Hemous (2012) The environment and directed technical change, American Economic Review 102 (1), 131-166.

Arrow, Kenneth (1962) The economic implications of learning by doing, Review of Economic Studies 29 (3), 155-173.

Athreye, Suma, and Andrew Godley (2009) Internationalization and technological leapfrogging in the pharmaceutical industry, Industrial and Corporate Change 18, 295-323.

Bosetti, Valentina, Carlo Carraro, Emanuele Massetti, and Massimo Tavoni (2008) International energy R&D spillovers and the economics of greenhouse gas atmospheric stabilization, Energy Economics 30 (6), 2912-2929.

Bovenberg, A. Lans and Sjak A. Smulders (1996) Transitional impacts of environmental policy in an endogenous growth model, International Economic Review 37 (4), 861-893.

Carrion-Flores, Carmen E. and Robert Innes (2010) Environmental innovation and environmental performance, Journal of Environmental Economics and Management 59 (1), 27-42.

Copeland, Brian. R. and M. Scott Taylor (2004) Trade, growth and the environment, Journal of Economic Literature 42 (1), 7-71.

Dechezleprêtre, Antoine, Matthieu Glachant, Ivan Haščič, Nick Johnstone, and Yann Ménière (2011) Invention and transfer of climate change-mitigation technologies: A global analysis, Review of Environmental Economics and Policy 5 (1), 109-130.

Dinda, Soumyananda (2004) Environmental Kuznets curve hypothesis: A survey, Ecological Economics 49 (4), 431-455.

Fischer, Carolyn and Richard G. Newell (2008) Environmental and technology policies for climate mitigation, Journal of Environmental Economics and Management 55 (2), 142-162.

Fredriksson, Per G. and Xenia Matschke (2015) Trade liberalization and environmental taxation in federal systems, Scandinavian Journal of Economics (Article first published online: 2 SEP 2015), DOI: 10.1111/sjoe.12127

Furukawa, Yuichi (2007) The protection of intellectual property rights and endogenous growth: Is stronger always better?, Journal of Economic Dynamics and Control 31 (11), 3644-3670.

Furukawa, Yuichi (2015) Leapfrogging cycles in international competition, Economic Theory 59 (2), 401-433.

Giovannetti, Emanuele (2001) Perpetual leapfrogging in Bertrand duopoly, International Economic Review 42 (3), 671-696.

Giovannetti, Emanuele (2013) Catching up, leapfrogging, or forging ahead? Exploring the effects of integration and history on spatial technological adoptions, Environment and Planning A 45, 930-946.

Goulder, Lawrence H. and Koshy Mathai (2000) Optimal CO2 abatement in the presence of induced technological change, Journal of Environmental Economics and Management 39 (1), 1-38.

Grimaud, André and Frederic Tournemaine (2007) Why can an environmental policy tax promote growth through the channel of education?, Ecological Economics 62 (1), 27-36.

Grossman, Gene M. and Alan B. Krueger (1993) Environmental impacts of a North American Free Trade Agreement, in The Mexico--U.S. Free Trade Agreement, ed. P. Garber, Cambridge: MIT Press.

Hall, Robert E (2008) Potential competition, limit pricing, and price elevation from exclusionary conduct, Issue in Competition Law and Policy 433, ABA Section of Antitrust Law, 433-448.

Harrington, Joseph, Jr. Fyodor Iskhakov, John Rust, and Bertel Schjerning (2010) A dynamic model of leap-frogging investments and Bertrand price competition, mimeo. Available at: http://econweb.umd.edu/~davis/eventpapers/RustDynamicModel.pdf (accessed on 27 October, 2014).

Hatzipanayotou, Panos, Sajal Lahiri, and Michael S. Michael (2005) Reforms of environmental policies in the presence of cross-border pollution and public-private clean-up, Scandinavian Journal of Economics 107(2), 315-333.

IPCC (2011) Renewable energy sources and climate change mitigation, Cambridge: Cambridge University Press.

IPCC (2014) Climate change 2014: Mitigation of climate change, Geneva: IPCC. Available at: http://mitigation2014.org/

John, A. Andrew and Rowena A. Pecchenino (1997) International and intergenerational environmental externalities, Scandinavian Journal of Economics 99(3), 371-387.

Lanjouw, Jean Olson and Ashoka Mody (1996) Innovation and the international diffusion of environmentally responsive technology, Research Policy 25 (4), 549-571.

Laurent-Lucchetti, Jérémy and Andrew J. Leach (2011) Generational welfare under a climate-change policy with induced innovation, Scandinavian Journal of Economics 113(4), 904-936.

Lovely, Mary, and David Popp (2011) Trade, technology, and the environment: Does access to technology promote environmental regulation?, Journal of Environmental Economics and Management 61 (1), 16-35.

Newell, Richard G., Adam B. Jaffe, and Robert N. Stavins (1999) The induced innovation hypothesis and energy-saving technological change, Quarterly Journal of Economics 114 (3), 941-975.

OECD (2012) OECD environmental outlook to 2050: The consequences of inaction, Paris: OECD.

Popp, David (2002) Induced innovation and energy prices, American Economic Review 92 (1), 160-180.

Popp, David (2012) The role of technological change in green growth, NBER Working Paper, No. 18506.

Quah, Danny (1996a) Regional convergence clusters across Europe, European Economic Review 40 (3-5), 951-958.

Quah, Danny (1996b) Empirics for economic growth and convergence, European Economic Review 40 (6), 1353-1375.

Petrakos, George, Andrés Rodríguez-Pose, and Antonis Rovolis (2005) Growth, integration, and regional disparities in the European Union, Environment and Planning A 37, 1837-1855.

Romer, Paul (1986) Increasing returns and long-run growth, Journal of Political Economy 94 (5), 1002-1037.

Schou, Poul (2002) Pollution externalities in a model of endogenous fertility and growth, International Tax and Public Finance 9 (6), 709-725.

Stern, David I. (2004) The rise and fall of the environmental Kuznets curve, World Development 32 (8), 1419-1439.

Young, Alwyn (1991) Learning by doing and the dynamic effects of international trade. Quarterly Journal of Economics 106 (2), 369-405.