Directed Technical Change in the Space Economy: Growth, Spillovers, and Orbital Fragility

This paper studies directed innovation in a dynamic space economy where orbital space is a productive but congestible commons. Space services raise aggregate productivity, while orbital debris increases collision risk and weakens the long-run value of space infrastructure. Innovation can be directed toward orbit-intensive technologies or toward orbit-preserving technologies. We solve a finite-horizon policy problem in which a planner chooses the path of preserving research and an orbital-use tax, and we compute the preserving-research subsidy required to decentralize the optimal allocation. The results show that the optimal transition operates mainly through the innovation margin. Redirecting scientists toward orbit-preserving research raises the relative productivity of preserving technologies, reduces collision risk and debris accumulation, and supports higher long-run output. The orbital-use tax is inactive in the benchmark calibration but becomes relevant when the welfare cost of debris is high. The findings suggest that sustainable growth in the space economy requires policies that not only regulate current orbital use, but also redirect technological change toward preserving the orbital environment.