Eurace@unibi-eco: A Model of Technology Transitions

Abstract

Purpose of this paper is the self-contained description of the green technology extension of the macroeconomic agent-based model Eurace@unibi. The original model is extended in mainly five dimensions:

(1) There are two types of production technology, i.e. a green and a conventional. Technology is embodied in capital goods and in the technological capabilities of firms.

(2) Employes are endowed with two types of evolving technology-specific skills that are needed to work effectively with specific capital goods.

(3) Based on their technological capabilities and the market environment, consumption goods (CG) firms decide whether to invest in green or conventional capital.

(4) An environmental accounting keeps track of the environmental impact of CG sector.

(5) A policy module allows to investigate the impact of different diffusion policies.

Main research areas covered by the model extension are directed technological change, innovation diffusion and technology substitution processes. A key feature of the model is endogenous, technology-specific absorptive capacity of heterogeneous technology adopters that evolves through learning. It is a comprehensive, macroeconomic model that allows to study the macroeconomic and distributional consequences of transition processes. The technical description of the model is complemented by a short summary and discussion of technology transition dynamics in a baseline simulation.