Directed Technological Change in an Ecological Macromodel

This paper presents a post-Keynesian ecological macro model that combines three strands of literature: the directed technological change mechanism developed in mainstream endogenous growth theory models, the ecological economic literature which highlights the role of green innovation and material ows, and the post-Keynesian school which provides a framework to deal with the demand side of the economy, nancial ows, and inter{ and intra{sectoral behavioral interactions. The model is stock-flow consistent and introduces research and development (R&D) as a component of GDP funded by private rm investment and public expenditure. The economy uses three complimentary inputs { Labor, Capital, and (non-renewable) Resources. Input productivities depend on R&D expenditures, which are determined by relative changes in their respective prices. Two policy experiments are tested; a Resource tax increase, and an increase in the share of public R&D on Resources. Model results show that policy instruments that are continually increased over a long-time horizon have better chances of achieving a \green" transition than one-o climate policy shocks to the system, that primarily have a short-run affect.