Institutional change and ecological structural change

The paper presents a model discussing the political economy dimension of the green transition. There are brown sectors whose share in value-added and employment should contract and green sectors whose share should increase. Green technological changes require more skilled workers, potentially exacerbating inequalities between them and unskilled workers. Trade unions advocate for a “Just Transition”, ensuring income protection and creating new “green jobs”. However, the green restructuring of the economy demands highly subsidized investments in the short run. A political economy problem arises: how to regulate brown capitalists, support green capitalists, and prevent unskilled workers from joining forces with brown capitalists to block the green transition. The solution can be positive feedback between green technical change, non-price competitiveness, and employment. The BOPCG model allows for highlighting the role of catching up in green technologies in non-price competitiveness and endogenous institutional change to give rise to a growth path consistent with the idea of a “just green transition”.