I show that environmental policy affects the cross sectoral allocation of demand and output if intermediate goods are differentiated according to their pollution intensity. When innovations are environmental friendly, a tax on emissions skews demand towards new goods, which are the most...

Can the knife-edge restriction on technology imposed by standard endogenous growth models be relaxed by allowing for nonrenewable resources entering the technology? To answer this question we examine whether stable endogenous growth is compatible with increasing returns to scale with respect to...