Essays on International Trade, Economic Growth and the Environment

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Essays on International Trade, Economic Growth and the Environment

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Title: Essays on International Trade, Economic Growth and the Environment
Author: Hémous, David
Citation: Hémous, David. 2012. Essays on International Trade, Economic Growth and the Environment. Doctoral dissertation, Harvard University.
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Abstract: This dissertation consists of three essays on Economic Growth. The first essay introduces directed technical change in a growth model with environmental constraints. The final good is produced from ”dirty” and ”clean” inputs. We show that when inputs are sufficiently substitutable, sustainable growth can be achieved with temporary taxes/subsidies that redirect innovation towards clean inputs; and that delay in intervention is costly as it later necessitates a longer transition phase with slow growth. The second essay explains how unilateral environmental policies undertaken by a group of committed countries can ensure sustainable growth in the presence of directed technical change. There are two countries and two tradeable goods: a nonpolluting good and a polluting one, which, itself, is produced with a clean and a dirty input. Innovation can be targeted at the non-polluting sector, at clean or at dirty technologies. I show that sustainable growth can generally not be achieved by unilateral carbon taxes but can be achieved by a temporary unilateral combination of clean research subsidies and a tariff. I characterize the first best policy, the world optimal policy under the constraint that one country must be in laissez-faire, and the optimal policy from the viewpoint of a single country. The third essay shows that long-term relationships, which reduce the static costs associated with low contractibility, create dynamic inefficiencies. We consider the repeated interaction between final good producers and intermediate input suppliers, where the provision of the intermediate input is non contractible. Producer/supplier pairs can be good matches or bad matches (featuring lower productivity). We build a ”cooperative” equilibrium that features cooperation in good matches without any collusion amongst suppliers. We contrast this set-up with the Nash equilibrium where cooperation is precluded and a contractible setting. Every period one supplier has the opportunity to innovate. We show that innovations need to be larger to break up existing relationships in the cooperative case than in the contractible and Nash cases. The rate of innovation in the cooperative case is lower than in the contractible case, and can be lower than in the Nash case.
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