nep-res New Economics Papers
on Resource Economics
Issue of 2021‒05‒10
three papers chosen by
Maximo Rossi
Universidad de la República

  1. The Economic Geography of Global Warming By Cruz, Jose-Luis; Rossi-Hansberg, Esteban
  2. The effects of publicly supported environmental innovations on firm growth in the European Union By Florian Flachenecker; Martin Kornejew; Mario Lorenzo Janiri
  3. The Efficacy of International Environmental Agreements when Adaptation Matters: Nash-Cournot vs Stackelberg Leadership By Michael Finus; Francesco Furini; Anna Viktoria Rohrer

  1. By: Cruz, Jose-Luis; Rossi-Hansberg, Esteban
    Abstract: Global warming is a worldwide and protracted phenomenon with heterogeneous local economic effects. In order to evaluate the aggregate and local economic consequences of higher temperatures, we propose a dynamic economic assessment model of the world economy with high spatial resolution. Our model features a number of mechanisms through which individuals can adapt to global warming, including costly trade and migration, and local technological innovations and natality rates. We quantify the model at a 1-degree by 1-degree resolution and estimate damage functions that determine the impact of temperature changes on a region's fundamental productivity and amenities depending on local temperatures. Our baseline results show welfare losses as large as 15% in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms. We use the model to assess the impact of carbon taxes, abatement technologies, and clean energy subsidies. Carbon taxes delay consumption of fossil fuels and help flatten the temperature curve but are much more effective when an abatement technology is forthcoming.
    JEL: F63 F69 Q51 Q54 Q56
    Date: 2021–02
  2. By: Florian Flachenecker (European Commission, Joint Research Centre, Brussels, Belgium); Martin Kornejew (University of Bonn, Bonn, Germany); Mario Lorenzo Janiri (European Commission, Joint Research Centre, Brussels, Belgium)
    Abstract: Enabling innovations with environmental benefits is considered crucial to align economic and environmental objectives. We estimate the economic effects of publicly supported environmental innovations for the business economy of 13 Member States of the European Union. Using an instrumental variable approach to address the inherent endogeneity problem, we find that the average publicly supported environmental innovation increases firm employment by 9%, turnover by 12% and market share by 12% over a two-year period. Notwithstanding country and sector heterogeneity, essentially all countries and sectors show positive effects. Moreover, the results are not driven by highly innovative firms but are based on small and medium-sized enterprises with limited innovation activity. Thus, this paper provides robust evidence that public financial support for environmental innovations can align economic and environmental objectives for a broad set of firms, sectors and countries. Public policy supporting environmental innovations might therefore facilitate the recovery and transition to a more sustainable economy.
    Keywords: eco-innovation; environmental innovation; competitiveness; firm growth; European Union
    JEL: C26 O31 O44 Q32 Q56
    Date: 2021–06
  3. By: Michael Finus (University of Graz, Austria); Francesco Furini (University of Hamburg, Germany and Università Ca’ Foscari Venezia, Italy); Anna Viktoria Rohrer (University of Graz, Austria)
    Abstract: We analyze the paradox of cooperation, as established by Barrett (1994), and later reiterated by many others, in a more general framework. That is, we show that stable coalitions are either small or if they are large, the potential gains from cooperation are small. First, we argue that the extension to a mitigation-adaptation game is a generalization of Barrett’s pure mitigation game. Second, we consider for this extension not only the Nash-Cournot scenario, as in Bayramoglu et al. (2018), but also the Stackelberg scenario. Third, we show generally that if mitigation levels in different countries are strategic substitutes, stable coalitions are larger in the Stackelberg than in the Nash-Cournot scenario. Fourth, this is reversed if mitigation levels are strategic complements, which is possible if the strategic interaction between mitigation and adaptation is sufficiently strong. Fifth, for all possible combination of assumptions, we demonstrate that the paradox of cooperation is robust, except if mitigation and adaptation were strategic complements, which we argue is an assumption not supported by empirical evidence.
    Keywords: Climate change; mitigation-adaptation game; international environmental agreements; paradox of cooperation; Nash-Cournot versus Stackelberg scenario.
    JEL: C72 F12 F18 H23 Q58
    Date: 2021–04

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