nep-ino New Economics Papers
on Innovation
Issue of 2016‒02‒04
twenty-one papers chosen by
Uwe Cantner
University of Jena

  1. A simple index of innovation with complexity By José Fernández Donoso
  2. A Triple Helix Model of Medical Innovation: Supply, Demand, and Technological Capabilities in terms of Medical Subject Headings By Alexander Petersen; Daniele Rotolo; Loet Leydesdor
  3. In-house versus External Basic Research and First-to-market Innovations By Dolores Añón Higón
  4. Foresighting for Inclusive Development By Allan Dahl Andersen; Per Dannemand Andersen
  5. On the role of public policies and wage formation for private investment in R&D:A long-run panel analysis By Tim Buyse; Freddy Heylen; Ruben Schoonackers
  6. The Role of Innovation and Globalization Strategies in Post-Crisis Recovery By Golikova Victoria; Kuznetsov Boris
  7. The Effect of Industrial Cluster Policy on Firm Performance in Ethiopia: Evidence from the Leather Footware Cluster By Getahun, Tigabu Degu
  8. Tigers Trapped: Tracing the Middle-income Trap through the East and Southeast Asian Experience By Veerayooth Kanchoochat; Patarapong Intarakumnerd
  9. Shaping the Agenda of a Grand Challenge: Institutional Mediation of Priorities in Avian Influenza Research By Matthew L. Wallace; Ismael Rafols
  10. Non-renewable resources, extraction technology, and endogenous growth By Stuermer, Martin; Schwerhoff, Gregor
  11. Urban Immigrant Diversity and Inclusive Institutions By Abigail Cooke; Thomas Kemeny
  12. Essays on knowledge sourcing and technological capability : A knowledge structure perspective By Li, Zhengyu
  13. Northern territory of the Russian Federation, Europe and America: Comparative analysis of the prospects for rural development By Nikulin, Alexander Michailovich; Trotsuk, Irina Vladimirovna; Kopoteva, Inna
  14. Deficits and Strengths in Austrian Competitiveness By Karl Aiginger
  15. Is Green Growth Relevant for Poor Economies? By Edward B. BARBIER
  16. Resources, experience and perseverance in entrepreneurs' perceived likelihood of success in an emerging economy By Quan Hoang Vuong; Thu Hang Do; Thu Trang Vuong
  17. Directions of formation of innovative organizational management structure By Ksenofontov, Michael
  18. Assessment of strategies for ICT investments using European Structural and Investment Funds: reflections from experts and practical examples By Katerina CIAMPI STANCOVA; Jens SORVIK
  19. The Water – Energy – Food Nexus: Who Owns it? By Rabi Mohtar
  20. Why Social Enterprises Are Asking to Be Multi-stakeholder and Deliberative: An Explanation around the Costs of Exclusion By Carlo Borzaga; Silvia Sacchetti
  21. Technological Progress, Time Perception and Environmental Sustainability By Evangelos V. Dioikitopoulos; Sugata Ghosh; Eugenia Vella

  1. By: José Fernández Donoso (School of Business and Economics, Universidad del Desarrollo)
    Abstract: Patents are the main source of data on innovation. Since most of the innovative activity happens outside of the patenting system, and since patents –and innovations- have different quality, complexity, and impact on each market, unweighted sums of patents and proxies are a bad indicator of a country’s innovative activity. I generate a very simple index of innovation that weights patents and exports by a complexity measure. Country rankings using this measure are consistent with market size, GDP per capita, and technological development of each country
    Keywords: Innovation, Mesure of innovation, Patenting, Technological development
    Date: 2016–01
  2. By: Alexander Petersen (Laboratory for the Analysis of Complex Economic Systems, IMT Institute for Advanced Studies, Lucca, Italy); Daniele Rotolo (SPRU, Science Policy Research Unit, University of Sussex, Brighton, United Kingdom); Loet Leydesdor (Amsterdam School of Communication Research (ASCoR), University of Amsterdam, Amsterdam, Netherlands)
    Abstract: We develop a model of innovation that enables us to trace the interplay among three key dimensions of the innovation process: (i) demand of and (ii) supply for innovation, and (iii) technological capabil- ities available to generate innovation in the forms of products, processes, and services. Building on triple helix research, we use entropy statistics to elaborate an indicator of mutual information among these dimensions that can provide indication of reduction of uncertainty. To do so, we focus on the medical context, where uncertainty poses signi cant challenges to the governance of innovation. We use the Medical Subject Headings (MeSH) of MEDLINE/PubMed to identify publications classi ed within the categories \Diseases" (C), \Drugs and Chemicals" (D), \Analytic, Diagnostic, and Ther- apeutic Techniques and Equipment" (E) and use these as knowledge representations of demand, supply, and technological capabilities, respectively. Three case-studies of medical research areas are used as representative 'entry perspectives' of the medical innovation process. These are: (i) human papilloma virus, (ii) RNA interference, and (iii) magnetic resonance imaging. We nd statistically signi cant periods of synergy among demand, supply, and technological capabilities (C??D??E) that point to three-dimensional interactions as a fundamental perspective for the understanding and gov- ernance of the uncertainty associated with medical innovation. Among the pairwise con gurations in these contexts, the demand-technological capabilities (C??E) provided the strongest link, followed by the supply-demand (D ?? C) and the supply-technological capabilities (D ?? E) channels.
    Keywords: triple helix; Medical Subject Headings; MEDLINE/PubMed; synergy; innovation; knowledge order; mutual information; dynamic vocabulary; redundancy.
    JEL: O32 O33
    Date: 2016–01
  3. By: Dolores Añón Higón (Departamento de Economía Aplicada II, Universitat de València)
    Abstract: This paper explores to what extent conducting internal basic research, as opposed to external basic research (i.e. outsourcing and collaboration with universities) encourages firms to bring new products into the market ahead of competitors, and contributes to innovation performance. The analysis is based on a sample of Spanish manufacturing firms over the period 2006-2012. Our findings suggest that conducting in-house basic research affects firm’s propensity to introduce product novelties. Furthermore, performing this activity continuously affects the probability of being product-pioneer in low and medium-low tech sectors. Collaboration with universities also helps in introducing new products ahead of competitors, but contracting scientific research from universities does not lead to a pioneer strategy
    Keywords: basic research, in-house, outsourcing, collaboration, pioneer, imitation
    JEL: D22 L21 O32
    Date: 2016–01
  4. By: Allan Dahl Andersen (TIK Centre, University of Oslo, Norway); Per Dannemand Andersen (DTU Management Engineering, Technical University of Denmark)
    Abstract: We propose that foresight can contribute to inclusive development by making innovation policy processes more inclusive, which in turn makes innovation systems more inclusive. Processes of developing future-oriented innovation policies are often unsuccessful and rarely inclusive. We conceptualize such processes as foresighting. We focus on how the ex-ante design of policymaking processes affects the actual process with a focus on inclusion, and we discuss how it affects policy effectiveness and innovation system transformation. Our argument is that processes of policymaking must be inclusive to affect and transform innovation systems because a set of distributed actors, rather than ministries and innovation agencies, is the gatekeepers of change. From this perspective, inclusion is a precondition rather than an obstacle for transformation. We develop a conceptual framework and use it to study design and processes in two foresight cases in two emerging economies - Brazil and South Korea. Although the research is exploratory and the results tentative, the empirical studies support our main propositions.
    Date: 2016–01
  5. By: Tim Buyse (Ghent University and SHERPPA); Freddy Heylen (Ghent University and SHERPPA); Ruben Schoonackers (National Bank of Belgium, Research Department, Ghent University)
    Abstract: This paper studies the drivers of business funded and performed R&D in a panel of 14 OECD countries since 1981. More specifically, we investigate the effects of public R&D related policies and wage formation. Following Pesaran (Econometrica, 2006) and Kapetanios et al. (Journal of Econometrics, 2011), our empirical strategy allows for cross-sectionally correlated error terms due to the presence of unobserved common factors, which are otentially non-stationary. We find that tax incentives are effective. Public funding (subsidization) of R&D performed by firms can also be effective if subsidies are not too low, neither too high. R&D performed within the government sector and within institutions of higher education is basically neutral with respect to business R&D. We find no evidence for crowding out, nor for complementarity. The higher education sector may, however, indirectly be of great significance. Our results reveal human capital accumulation at the tertiary level as a key driver of business R&D in the OECD during the last decades. As to the impact of wage formation, using an indicator for wage pres- sure developed by Blanchard (Economic Policy, 2006), we find that wage moderation may contribute to innovation, but only in fairly closed economies and in economies with flexible labour markets. In highly open economies and economies with rigid labour markets rather the opposite holds. In these economies high wage pressure may enhance creative destruction and force firms to innovate as a competitive strategy. Our results show that a careful treatment of the properties of the data is crucial.
    Keywords: R&D, technology policy, wage formation, panel cointegration
    JEL: E22 J30 O31 O38 O57
    Date: 2016–01
  6. By: Golikova Victoria (National Research University Higher School of Economics); Kuznetsov Boris (National Research University Higher School of Economics)
    Abstract: The aim of the research is to conduct an empirical investigation and reveal what types of globalization and innovation strategies in turbulent and unfavorable regional institutional environment are most likely to be associated with different trajectories of Russian manufacturing firms’ performance in 2007-2012. We employ the results of empirical survey of 1000 medium and large enterprises in manufacturing (2009) linked to financial data from Amadeus database and the data on the regional institutional environment. We test that (1) introduction of innovations before the crisis ceteris paribus helped the firms to successfully pass the crisis and recover. We expect that (2) companies that became globalized before the crisis (via importing of intermediate and capital goods; exporting; FDI; establishment of partner linkages with foreign firms) ceteris paribus are more likely to successfully pass the crisis and grow. And (3) propose the positive effect of synergy of innovation efforts and globalization strategy of the firm. We expect that the abovementioned factors are complimentary and reinforce the ability of the firm to recover after crisis shock. We found strong support for the hypothesis that firms financing introduction of new products before the crisis and simultaneously managed to promote and sell them on the global market were rewarded by quick return to the growing path after global crisis. Other strategies, i.e. solely innovations without exporting play insignificant role while exporting without attempts to introduce new products contribute even negatively to post-crisis recover. Institutional environment also matters: in the regions with less level of corruption firms were more likely to grow after the crisis
    Keywords: firm performance; globalization; innovation; manufacturing firms; strategy
    JEL: Z
    Date: 2016
  7. By: Getahun, Tigabu Degu
    Abstract: This paper empirically analyzes the productivity, profitability, innovation and network effects of a public policy promoting micro and small scale industrial clusters in Ethiopia. To this end, firm-level survey data was collected from randomly selected clustered leather shoe manufacturers that have directly benefited from the policy and those that do not, both before and after the cluster policy intervention. The results from econometric analysis suggests that the industrial cluster policy adversely impacts the productivity, profitability, growth, and innovation performance of the small and micro leather shoe manufacturing enterprises that moved to the government created clusters . The analysis of the transmission mechanism further reveals that the relocated cluster policy hampers the treated firms’ collaborative business and knowledge network and aggravates their growth impediments which includes lack of trust, high customer and supplier search and reach cost, lack of market information, imperfect contract enforcement, delays in the supply of raw materials and the lack of skilled labor. The time lag between policy implementation and its impacts may conceal the long-term impact of the cluster policy. The overwhelming majority of the representatives of treatment group firms also continue to believe that their buisness performance will improve over time as a result of their participation in the MSE cluster development program. This study is a pioneer to quantitatively evaluate the productivity, profitability, innovation and network effect of industrial cluster policy in Ethiopia.
    Keywords: Cluster Policy, Productivity, Profitability, Networks, Small and Micro Enterprises, Ethiopia, Institutional and Behavioral Economics, Production Economics, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, D02, D04, D25, D85, L11, L52, L67, O14,
    Date: 2016–01
  8. By: Veerayooth Kanchoochat; Patarapong Intarakumnerd
    Abstract: The “middle-income trap†has recently become a powerful buzzword in the international development community. Despite using the same phrase, the existing literature varies considerably. The objective of this paper is twofold. First, it represents one of the earliest attempts at reviewing this burgeoning area of research. Based on differences in theoretical underpinnings and policy implications, the literature is classified into three groups: (1) getting education and institutions right; (2) changing export compositions by following comparative advantage; and (3) industrial upgrading by the proactive state. Second, it examines the validity of these three bodies of literature through catching-up experiences of selected newly industrializing economies in East and Southeast Asia. It argues that each strand falls into a different trap: the causal, the historical, and the practical. In discussing these three traps, this paper provides six propositions based theoretically on old-school development economics and innovation literature.
    Keywords: middle-income trap, Asian Newly Industrializing Economies (NIEs), state intervention, industrial policy, structural transformation
    JEL: O14 O25 O53
    Date: 2014–02
  9. By: Matthew L. Wallace (Ingenio (CSIC-UPV), Universitat Politècnica de València, València, Spain); Ismael Rafols (Ingenio (CSIC-UPV), Universitat Politècnica de València, València, Spain; SPRU (Science Policy Research Unit), University of Sussex, Brighton, England; Observatoire des Sciences et Techniques (OST-HCERES), Paris, France)
    Abstract: Since outbreaks in 2003, avian influenza has received a considerable amount of funding and become a controversial science policy issue in various respects. Like in many so-called “grand challenges”, a variety of perspectives have emerged over how to “tackle” avian influenza and public voices have expressed concern over how research funds are being allocated. In this article we inquire into the priorities of avian influenza research. We use qualitative and quantitative data to examine the relations between societal demands for public science and the existing “research landscape”. Interviews of a cross-section of stakeholders revealed a diversity of perspectives on existing research and its desired outcomes, and a generalized difficulty to explicitly connect the two. We also observed a lack of a common understanding of priorities for conducting and applying research. Rather than well-defined research agendas, we found that most public avian influenza research is shaped by three institutional contexts: pharmaceutical industry priorities, publishing and public research funding pressures, and the mandates of international and national science-based policy or public health organizations. Our results are significant for informing not only resource allocation issues, but also a broad perspective of research governance that explicitly takes into account underlying incentive structures when defining priorities.
    Date: 2016–02
  10. By: Stuermer, Martin (Federal Reserve Bank of Dallas); Schwerhoff, Gregor (Mercator Research Institute on Global Commons and Climate Change (MCC))
    Abstract: We add an extractive sector to an endogenous growth model of expanding varieties and directed technological change. Firms increase their economically extractable stocks of non-renewable resources through R&D investment in extraction technology and reduce their stocks through extraction. We show how the geological distribution of the non-renewable resource interacts with technological change. Our model accommodates long-term trends in non-renewable resource markets - namely stable prices and exponentially increasing extraction - for which we present data going back to 1792. The model suggests that over the long term, development of new extraction technologies neutralizes the increasing demand for non-renewable resources in industrializing countries such as China.
    Keywords: Non-renewable resources; endogenous growth; extraction technology
    JEL: O30 O41 Q30
    Date: 2015–12–29
  11. By: Abigail Cooke; Thomas Kemeny
    Abstract: Recent evidence suggests that rising immigrant diversity in cities offers economic benefits, including improved innovation, entrepreneurship and productivity. One potentially important but underexplored dimension of this relationship is how local institutional context shapes the benefits firms and workers receive from the diversity in their midst. Theory suggests that institutions can make it less costly for diverse workers to transact, thereby catalyzing the latent bene ts of heterogeneity. This paper tests the hypothesis that the effects of immigrant diversity on productivity will be stronger in locations featuring more “inclusive" institutions. It leverages comprehensive longitudinal linked employer-employee data for the U.S. and two distinct measures of inclusive institutions at the metropolitan area level: social capital and pro- or anti-immigrant ordinances. Findings confirm the importance of institutional context: in cities with low levels of inclusive institutions, the benefits of diversity are modest and in some cases statistically insignificant; in cities with high levels of inclusive institutions, the benefits of immigrant diversity are positive, significant, and substantial. Moreover, natives residing in cities that have enacted laws restricting immigrants enjoy no diversity spillovers whatsoever, while immigrants in these cities continue to receive a diversity bonus. These results confirm the economic significance of urban immigrant diversity, while suggesting the importance of local social and economic institutions.
    Date: 2016–01
  12. By: Li, Zhengyu (Tilburg University, School of Economics and Management)
    Abstract: In today’s increasingly competitive and rapidly changing markets that depend heavily on innovation, firms are increasingly opt to use external knowledge sourcing strategies to complement their internal efforts in developing technological capabilities. While external knowledge sourcing strategy can bring substantial opportunities for new knowledge generation, it imposes huge challenges to the firms for successful integration of external knowledge, making appropriate execution of external knowledge sourcing strategies crucial. However, the literature and empirical evidence has not yet been able to offer a conclusive indication of what drives the performance variations of different firms in developing technological capabilities from sourcing knowledge externally. To address this under-explored question, this dissertation presents three empirical studies that examine the antecedents of the performance variations in developing technological capabilities through sourcing knowledge externally. By looking at firms’ external knowledge sourcing strategies in the three modes of governance with different levels of hierarchy (i.e. licensing, alliances, and acquisitions), the findings of this dissertation aim to improve our understanding of how external knowledge sourcing strategies can be better managed to develop technological capabilities.
    Date: 2016
  13. By: Nikulin, Alexander Michailovich (Russian Presidential Academy of National Economy and Public Administration); Trotsuk, Irina Vladimirovna (Russian Presidential Academy of National Economy and Public Administration); Kopoteva, Inna (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: Currently, large and Nonchernozem northern European Russia and the Russian Far East and Siberia (though, like most foreign circumpolar countries) are originally desert or zapustevayuschie space in terms of rural development. On the other hand, a variety of natural, technological and demographic-migratory factors such as global warming, new technologies and social innovation, demographic change, migration can create unexpected new prospects for rural development in the northern and Russian and foreign non-black areas. The paper summarized the Russian and foreign (Scandinavian countries, Finland, USA, Canada) experience of rural development at regional and local levels, are considered public, business and non-profit programs and projects for rural development, allowing some to formulate forecasts and proposals for rural development in the northern the Russian Federation, taking into account international experience.
    Keywords: Northern European Russia, Russian Far East, Siberia, rural development
    Date: 2015–10–01
  14. By: Karl Aiginger
    Abstract: Wettbewerbsfähigkeit wird noch immer oft rein kostenmäßig definiert (niedrige Löhne, Energiepriese). Für Industrieländer und besonders Topeinkommensländer wie Österreich spielen aber Faktoren wie Innovation, Ausbildung und staatliche und nicht staatliche Institutionen (Sozialpartnerschaft, Vertrauen, schnelle Entscheidungen) eine wichtige Rolle. Und der Wettbewerbserfolg sollte nicht nur an den erzielten Einkommen, sondern auch an sozialen und ökologischen Kriterien gemessen werden. Österreich ist auch nach dieser breiteren Definition des Wettbewerbserfolges - gemessen an der Erreichung von Beyond GDP Zielen - mittelfristig ein Erfolgsmodell.
    Date: 2016–01
  15. By: Edward B. BARBIER (Université du Wyoming)
    Abstract: To be relevant to developing countries, green growth must be reconciled with the two key structural features of natural resource use and poverty in these countries.  First, primary products account for the majority of their export earnings, and they are unable to diversify from primary production. Second, many economies have a substantial share of their rural population located on less favored agricultural land and in remote areas, thus encouraging “geographic” poverty traps.  If green growth is to be a catalyst for economy-wide transformation and poverty alleviation in developing countries, then it must be accompanied by policies aimed directly at overcoming these two structural features.  Policies and reforms should foster forward and backward linkages of primary production, enhance its integration with the rest of the economy, and improve opportunities for innovation and knowledge spillovers.  Rural poverty, especially the persistent concentration of the rural poor on less favored agricultural lands and in remote areas, needs to be addressed by additional targeted policies and investments, and where necessary, policies to promote rural-urban migration.
    JEL: Q15 O13 O44
    Date: 2015–12
  16. By: Quan Hoang Vuong; Thu Hang Do; Thu Trang Vuong
    Abstract: This paper introduces new results obtained from a statistical investigation into a3071-observation data set collected from a Vietnamese nationwideentrepreneurship survey. From established relationships, such factors aspreparedness, financial resources and participation in social networks areconfirmed to have significant effects on entrepreneurial decisions. Entrepreneurs,both financially constrained and unconstrained, who have a business plan tend tostart their entrepreneurial ventures earlier. Also, financial constraints have aprofound impact on the entrepreneurial decisions. When perceiving the likelihoodof success to be high, an entrepreneur shows the tendency for prompt action onbusiness ideas. But when seeing the risk of prolonging the waiting time to firstrevenue, a prospective entrepreneur would be more likely to wait for morefavorable conditions despite the vagueness of "favorable".Additionally, empirical computations indicate that there is a 41.3% probabilitythat an extant entrepreneur who is generating revenue sees high chance ofsuccess. Past work and entrepreneurial experiences also have positive impactson both the entrepreneurial decisions and perceived chance of success.
    Keywords: Entrepreneurship; new venture; transitional economies
    JEL: L26 M13 P27
    Date: 2016–01–18
  17. By: Ksenofontov, Michael
    Keywords: management, organization, enterprise, innovation, innovative organizational management structure, competitiveness, Agribusiness, Institutional and Behavioral Economics,
    Date: 2015–09–16
  18. By: Katerina CIAMPI STANCOVA (European Commission – JRC - IPTS); Jens SORVIK (European Commission – JRC - IPTS)
    Abstract: DG Connect and DG JRC have been supporting MSs and regions in fostering the ICT dimension of planned investments under ESIF. As part of this activity, assistance has been given to seven EU regions. This paper provides a systematic summary of the experts’ findings and discusses critical issues pointed out in the expert reports and at an expert workshop.
    Keywords: regional policies, regional innovation, smart specialisation, European Structural and Investment Funds, information and communication technologies (ICT), Digital Agenda
    Date: 2016–01
  19. By: Rabi Mohtar
    Abstract: The water-energy-food (WEF) nexus has emerged over the last few years as an innovative and holistic platform for resource management and allocation. Unlike many other disciplines that make their way to the policy circle through academic debates, the nexus emerged from the global and policy business community as a platform to guide sustainability efforts. It is, with no doubt, that the nexus will find its way to the implementation of the sustainability development goals (SDGs), approved by the UN general assembly in September 2015. The nexus is also finding its way to the academic community, where a lot of scientific questions are awaiting answers: what are the data needs? What are appropriate modelling strategies? How will we scale (upscaling and downscaling)? And what is the appropriate scale for approaching the nexus? These are but a few of the technical challenges. With that in mind, critical questions need answers regarding the governance of the nexus, including ownership and appropriate governance structures. The global community is in urgent need of good, successful examples of how the nexus has helped reach water, energy and food security goals.
    Keywords: Water, energy, food, nexus, development, governance, agriculture, climate, innovation, efficiency, policy choices, supply chain, private public partnership
    Date: 2016–01
  20. By: Carlo Borzaga; Silvia Sacchetti
    Abstract: The study of multi-stakeholdership (and multi-stakeholder social enterprises in particular) is only at the start. Entrepreneurial choices which have emerged spontaneously, as well as the first legal frameworks approved in this direction, lack an adequate theoretical support. The debate itself is underdeveloped, as the existing understanding of organisations and their aims resist an inclusive, public interest view of enterprise. Our contribution aims at enriching the thin theoretical reflections on multi-stakeholdership, in a context where they are already established, i.e. that of social and personal services. The aim is to provide an economic justification on why the governance structure and decisionmaking praxis of the firm needs to account for multiple stakeholders. In particular with our analysis we want: a) to consider production and the role of firms in the context of the “public interest” which may or may not coincide with the non-profit objective; b) to ground the explanation of firm governance and processes upon the nature of production and the interconnections between demand and supply side; c) to explain that the costs associated with multi-stakeholder governance and deliberation in decision-making can increase internal efficiency and be “productive” since they lower internal costs and utilise resources that otherwise would go astray. The key insight of this work is that, differently from major interpretations, property costs should be compared with a more comprehensive range of costs, such as the social costs that emerge when the supply of social and personal services is insufficient or when the identification of aims and means is not shared amongst stakeholders. Our model highlights that when social costs derived from exclusion are high, even an enterprise with costly decisional processes, such as the multistakeholder, can be the most efficient solution amongst other possible alternatives.
    Keywords: Social Value Chain; Governance; Multistakeholdership; Deliberation; Externalities; Impacts; Social Enterprise; Social Innovation; Social Services
    JEL: I14 I31 L21 L23 L31
    Date: 2015
  21. By: Evangelos V. Dioikitopoulos (Department of Management, King's College London); Sugata Ghosh (Department of Economics amd Finanace, Brunel University London); Eugenia Vella (Department of Economics, University of Sheffield)
    Abstract: This paper explores the relationship among technological progress, environment and growth by combining endogenous efficiency of public abatement with endogenous discounting. Our model can feature two different balanced growth paths corresponding to different levels of environmental quality, which remains constant in the long-run although the economy grows. The multiple equilibria point to a non-monotonic relationship among technological progress, growth and the environment, as observed in the data. A Ramsey planner can implement the good equilibrium; however, under a positive technology shock, the economy achieves higher long-run growth at the cost of lower environmental quality (even if agents value the environment highly). This finding could help us explain why some advanced economies may not succeed in cleaning the environment effectively.
    Keywords: Time preference; growth; environmental quality; Fiscal policy; technological progress
    JEL: D90 E21 E62 H31 O44 Q28
    Date: 2016

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