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Environmental policies in a stagnant economy

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  • Ikefuji, Masako
  • Ono, Yoshiyasu

Abstract

In this study, we examine the impact of environmental policies on consumption and pollution emissions in the cases of full employment and stagnant economy using a dynamic optimization model featuring a monetary economy with persistent unemployment. If full employment prevails, environmental policies such as emission tax and public pollution abatement will naturally crowd out commodity production and thereby decrease consumption. However, if there is unemployment, environmental policies stimulate consumption and production by increasing the total employment and mitigating deflation, simultaneously generating additional pollution emissions. Net pollution emissions may eventually increase. We also examine the optimal environmental policy mix.

Suggested Citation

  • Ikefuji, Masako & Ono, Yoshiyasu, 2021. "Environmental policies in a stagnant economy," Economic Modelling, Elsevier, vol. 102(C).
  • Handle: RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001632
    DOI: 10.1016/j.econmod.2021.105574
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    Cited by:

    1. Masako Ikefuji & Yoshiyasu Ono, 2023. "Environmental Policies and Stagnation in a Two-Country Economy," ISER Discussion Paper 1222, Institute of Social and Economic Research, Osaka University.
    2. Li, Mengjie & Du, Weijian, 2022. "Opening the black box of capacity governance: Environmental regulation and capacity utilization of microcosmic firms in China," Economic Modelling, Elsevier, vol. 108(C).

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    More about this item

    Keywords

    Secular stagnation; Unemployment; Public abatement; Emission tax;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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