Hicks meets Hotelling: the direction of technical change in capital-resource economies

We analyze a two-sector growth model with directed technical change where man-made capital and exhaustible resources are essential for production. The relative profitability of factor-specific innovations endogenously determines whether technical progress will be capital- or resource-augmenting. We show that any balanced growth equilibrium features purely resource-augmenting technical change. This result is compatible with alternative specifications of preferences and innovation technologies, as it hinges on the interplay between productive efficiency in the final sector, and the Hotelling rule characterizing the efficient depletion path for the exhaustible resource. Our result provides sound micro-foundations for the broad class of models of exogenous/endogenous growth where resource-augmenting progress is required to sustain consumption in the long run, contradicting the view that these models are conceptually biased in favor of sustainability.

Carbon leakage revisited: unilateral climate policy with directed technical change

Using a stylized theoretical model, we argue that current economic analyses of climate policy tend to over-estimate the degree of carbon leakage, as they abstract from the effects of induced technological change. We analyse carbon leakage in a two-country model with directed technical change, where only one of the countries enforces an exogenous cap on emissions. Climate policy induces changes in relative prices, that cause carbon leakage through a terms-of-trade effect. However, these changes in relative prices also affect the incentives to innovate in different sectors. This leads to a counterbalancing induced-technology effect, which always reduces carbon leakage. We therefore conclude that the leakage rates reported in the literature may be too high, as these estimates neglect the effect of price changes on the incentives to innovate.

Mixed Religion Schools in NI and Israel

This paper compares the concept of mixed faith/cultural education in Northern Ireland and Israel. It is primarily concerned with the processes that these 'integrated' schools adopt in their quest to improve relations between divided ethnic groups. Drawing on qualitative data collected in two mixed religion primary schools in each jurisdiction the paper shows that the schools' existing cultural norms act as important mediating influences on the way that inter-group relationships are constructed. The paper concludes that attention needs to be paid to both the policy context and the culture if contact initiatives are to be successful.