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Learning by Doing with Constrained Growth Rates:An Application to Energy Technology Policy

Abstract:
Learning by doing methodology attributes cost reductions of a technology to cumulative investment and experience. This paper argues that in addition market growth rates must also be considered. Historically growth rates have been limited in most sectors, thus allowing for feedback in the learning process. When market growth is below the optimal rate, the marginal value of additional investment could be a multiple of the direct learning benefit. Analytic and numeric models quantify this impact emphasizing the need for tailored technology policy in addition to carbon pricing. Implications for the modeling of endogenous technological change are discussed.

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Energy Specializations: Energy Access – Sustainable Development and Distributed Energy; Energy and the Environment – Climate Change and Greenhouse Gases; Energy and the Environment – Policy and Regulation

JEL Codes:
Q01 - Sustainable Development
Q54 - Climate; Natural Disasters and Their Management; Global Warming
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Learning by doing, Market growth, Technology policy, Carbon pricing, Endogenous technological change

DOI: 10.5547/ISSN0195-6574-EJ-Vol29-NoSI2-9


Published in Volume 29, Special Issue #2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.