Knowledge Diffusion, Endogenous Growth, and the Costs of Global Climate Policy

50 Pages Posted: 19 Dec 2015

See all articles by Lucas Bretschger

Lucas Bretschger

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Sebastian Rausch

ZEW – Leibniz Centre for European Economic Research; Heidelberg University - Alfred Weber Institute for Economics; ETH Zürich - Centre for Energy Policy and Economics (CEPE); Massachusetts Institute of Technology (MIT) - Joint Program on the Science and Policy of Global Change

Filippo Lechthaler

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Lin Zhang

City University of Hong Kong (CityU)

Date Written: December 17, 2015

Abstract

This paper examines the effects of knowledge diffusion on growth and costs of climate policy. We develop a general equilibrium model with endogenous growth which represents knowledge diffusion between sectors and regions. Knowledge diffusion depends on accessibility and absorptive capacity which we estimate econometrically using patent and citation data. Knowledge diffusion leads to a “greening” of economies boosting productivity of “clean” carbon-extensive sectors. Knowledge diffusion lowers the costs of global climate policy by about 90% for emerging countries (China) and 20% for developed regions (Europe and USA), depending on the substitutability between different knowledge types.

Keywords: Technological Change, Choices and Consequences, Environment and Growth, Technological Innovation, Computable General Equilibrium Models

JEL Classification: O33, O44, Q55, C68

Suggested Citation

Bretschger, Lucas and Rausch, Sebastian and Lechthaler, Filippo and Zhang, Lin, Knowledge Diffusion, Endogenous Growth, and the Costs of Global Climate Policy (December 17, 2015). Available at SSRN: https://ssrn.com/abstract=2705001 or http://dx.doi.org/10.2139/ssrn.2705001

Lucas Bretschger

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Sebastian Rausch (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

HOME PAGE: http://www.sebastianrausch.com

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

ETH Zürich - Centre for Energy Policy and Economics (CEPE) ( email )

8092 Zurich
Switzerland

Massachusetts Institute of Technology (MIT) - Joint Program on the Science and Policy of Global Change ( email )

77 Massachusetts Ave, Bldg E40-474
Cambridge, MA 02139
United States

Filippo Lechthaler

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Lin Zhang

City University of Hong Kong (CityU) ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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