How to Accelerate Green Technology Diffusion? An Agent-based Approach to Directed Technological Change with Coevolving Absorptive Capacity

88 Pages Posted: 9 Jan 2019

See all articles by Kerstin Hötte

Kerstin Hötte

Bielefeld University - Department of Business Administration and Economics

Date Written: January 2, 2019

Abstract

The window of opportunity for effective climate change mitigation is closing. Hence, it is decisive to unterstand how to accelerate the diffusion of climate friendly technologies. Path dependence of technological change is an explanation for sluggish diffusion even if a technology is superior in the long run. This paper studies the determinants of diffusion, learning and the coevolution of innovation and hetergeneous absorptive capacity. I show how the effectiviness of different market based climate policies depends on the type and strength of diffusion barriers.

I introduce a macroeconomic agent-based model that is an eco-technology extended version Eurace@unibi model. Technology is heterogeneous by type (green or brwon). Firms choose between types when acquiring capital goods and build up type-specific technological know-how that is needed to exploit the productive potential of capital. Path dependence is operationalized as accumulated diffusion barriers taking the form of inferior technical performance of supplied green capital and type-specific know-how of adopters. The barriers interrelate with positive feedback loops from market induced innovation dynamics and learning by doing, and analyze how these mechanisms explain path dependence and the emerging macroeconomic patterns of technology diffusion. Environmental taxes can outweigh a lower technical performance and subsidies perform better if lacking capabilities hinder firms to adopt a sufficiently mature technology.

Suggested Citation

Hötte, Kerstin, How to Accelerate Green Technology Diffusion? An Agent-based Approach to Directed Technological Change with Coevolving Absorptive Capacity (January 2, 2019). Bielefeld Working Papers in Economics and Management No. 01-2019, Available at SSRN: https://ssrn.com/abstract=3312654 or http://dx.doi.org/10.2139/ssrn.3312654

Kerstin Hötte (Contact Author)

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

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