INDUCED TECHNICAL CHANGE, ADJUSTMENT COSTS AND ENVIRONMENTAL-POLICY MODELING

In this paper I develop a neo-Schumpeterian model of induced technical change where firms/polluters determine their effort in environment-sa ving technical change. Two technological scenarios are distinguished d epending on whether basic research is endogenous or exogenous. Buildin g on this analytical setting, I show that in the presence of non-linea r adjustment costs the choice of instruments of environmental policy s hould be tailored to the actual characteristics of the firms'/polluter s' technological environment. Moreover, this analysis confirms that se arching for efficient environmental policy mixes is more rewarding tha n focusing on single instruments, notably pollution taxation.