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Environmental Taxes and Economic Growth with Multiple Growth Engines

Author

Listed:
  • Beladi Hamid

    (Department of Economics, University of Texas at San Antonio, San Antonio, USA)

  • Chen Ping-ho
  • Hu Mei-ying
  • Lai Ching-chong

    (Department of Economics, Tunghai University, Taichung, Taiwan)

  • Chu Hsun

    (Institute of Economics, Academia Sinica, Taipei, Taiwan)

Abstract

We develop an endogenous growth model in which long-run growth is driven by three engines: private abatement R&D, expanding-variety R&D, and capital accumulation. We show that an environmental tax activates private abatement by directing researchers from the variety R&D sector to the abatement R&D sector, which helps the economy avoid the environmental disaster. Our results also show that the effect of the environmental tax on long-run growth is uncertain, depending mainly on the relative productivity between the two R&D sectors. If the abatement R&D sector is sufficiently productive, increasing the environmental tax will enhance the balanced output growth rate and social welfare.

Suggested Citation

  • Beladi Hamid & Chen Ping-ho & Hu Mei-ying & Lai Ching-chong & Chu Hsun, 2021. "Environmental Taxes and Economic Growth with Multiple Growth Engines," The B.E. Journal of Macroeconomics, De Gruyter, vol. 21(2), pages 629-658, June.
    • Handle: RePEc:bpj:bejmac:v:21:y:2021:i:2:p:629-658:n:9
    DOI: 10.1515/bejm-2020-0108
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    More about this item

    Keywords

    private abatement R&D; endogenous growth; environmental tax; innovation;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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