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Directed technological change in a Post-Keynesian Ecological Macromodel

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Original languageEnglish
Pages (from-to)168-188
Number of pages21
JournalECOLOGICAL ECONOMICS
Volume154
Early online date13 Aug 2018
DOIs
Accepted/In press12 Jul 2018
E-pub ahead of print13 Aug 2018
Published1 Dec 2018

Bibliographical note

This work was supported by the Oesterreichische Nationalbanks (Austrian Central Bank) Anniversary Fund [grant number: 17400].

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Abstract

This paper presents a post-Keynesian ecological macromodel, which is stock-flow consistent, and incorporates directed technological change. Private and public R&D spending across three competing, yet complementary inputs – Labor, Capital, and Resources – follow a portfolio allocation decision, where inputs with relatively higher growth in costs, see higher R&D investment and productivity gains. Two policy experiments are reported; a market-based Resource tax increase, and a centralized green policy, where public R&D budget is shifted towards Resource-saving technologies. We highlight that in the presence of labor market institutions, which give rise to hysteresis, and limited R&D budgets, a policy of continuous Resource tax growth is needed to induce Resource-saving technological change to achieve a greener economy. This needs to be coupled with planned government spending adjustment to spur demand and boost investment. The findings also suggest that a mix of market-based and centralized policies may be optimal

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