The economics of transition pathways: A proposed taxonomy and a policy experiment

18 December 2020

Kerstin Hötte
View Journal Article / Working Paper

Pathways of transition differ across countries, industrial sectors, firms and technologies, but little is known about the reasons for these differences and macroeconomic consequences. I show theoretically how differences in transition patterns and macroeconomic side effects can be explained by the characteristics of competing technologies. Competing technologies are characterized by their relative superiority in an exogenous socio-technical landscape, their relative maturity and cross-technology interactions in the process of specialization. These characteristics are linked to the multi-layer perspective of transition theory and build the conceptual basis of technology in the macroeconomic agent-based model Eurace@unibi-eco. It is shown that the characteristics can be an explanation for heterogeneous transition pathways. Policy may alter the exogenous landscape conditions that surround technological competition. It is shown how different market-based instruments can be used to accelerate and stabilize a transition process. Taxes and subsidies perform differently conditional on the characteristics of competing technologies.