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.

Social categorizations, social comparisons and stigma: Presentations of self in people with learning difficulties

Self-categorization theory stresses the importance of the context in which the metacontrast principle is proposed to operate. This study is concerned with how 'the pool of psychologically relevant stimuli' (Turner, Hogg, Oakes, Reicher & Wetherell, 1987, p. 47) comprising the context is determined. Data from interviews with 33 people with learning difficulties were used to show how a positive sense of self might be constructed by members of a stigmatized social category through the social worlds that they describe, and therefore the social comparisons and categorizations that are made possible. Participants made downward comparisons which focused on people with learning difficulties who were less able or who displayed challenging behaviour, and with people who did not have learning difficulties but who, according to the participants, behaved badly, such as beggars, drunks and thieves. By selection of dimensions and comparison others, a positive sense of self and a particular set of social categorizations were presented. It is suggested that when using self-categorization theory to study real-world social categories, more attention needs to be paid to the involvement of the perceiver in determining which stimuli are psychologically relevant since this is a crucial determinant of category salience.