Julien Dubois

This paper proposes a theory to disentangle input-saving technological progress from technical efficiency gains of capital. Assuming different vintages of capital, each defined by fixed input requirements, I derive the optimal allocation of a scarce resource – namely energy – over time. Qualitatively, reduced capital flexibility creates path dependence, slowing down the transition away from fossil fuels. Quantitatively, a calibrated version of the model suggests that standard frameworks may underestimate both the duration of the transition and the welfare implications along the adjustment path.