IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v34y2014icp151-160.html
   My bibliography  Save this article

Environmental consciousness, economic growth, and macroeconomic instability

Author

Listed:
  • Shieh, Jhy-yuan
  • Chen, Jhy-hwa
  • Chang, Shu-hua
  • Lai, Ching-chong

Abstract

This paper develops an endogenous growth model to examine the linkages between environmental consciousness and economic growth. It is found that macroeconomic instability can arise in a simple AK-type growth model when the pollution externality is present only in the agent's utility function. It is also found that the impact of environmental consciousness on the economic growth rate is ambiguous. The economic systems (a decentralized versus centralized economy) and the ecological evolution (the specific pollution growth rate) are two crucial factors that determine the relationship between environmental consciousness and economic growth.

Suggested Citation

  • Shieh, Jhy-yuan & Chen, Jhy-hwa & Chang, Shu-hua & Lai, Ching-chong, 2014. "Environmental consciousness, economic growth, and macroeconomic instability," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 151-160.
    • Handle: RePEc:eee:reveco:v:34:y:2014:i:c:p:151-160
    DOI: 10.1016/j.iref.2014.08.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056014001087
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.iref.2014.08.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Park, Hyun, 2013. "Do habits generate endogenous fluctuations in a growing economy?," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 54-68.
    2. Alonso-Carrera, Jaime & Caballe, Jordi & Raurich, Xavier, 2005. "Growth, habit formation, and catching-up with the Joneses," European Economic Review, Elsevier, vol. 49(6), pages 1665-1691, August.
    3. Harrison, Sharon G. & Weder, Mark, 2002. "Tracing externalities as sources of indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 851-867, May.
    4. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
    5. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    6. Ligthart, Jenny E. & van der Ploeg, Frederick, 1994. "Pollution, the cost of public funds and endogenous growth," Economics Letters, Elsevier, vol. 46(4), pages 339-349, December.
    7. Chen, Jhy-hwa & Shieh, Jhy-yuan & Chang, Juin-jen & Lai, Ching-chong, 2009. "Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 423-437, September.
    8. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January.
    9. Chu, Hsun & Lai, Ching-chong, 2014. "Abatement R&D, market imperfections, and environmental policy in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 20-37.
    10. Itaya, Jun-ichi, 2008. "Can environmental taxation stimulate growth? The role of indeterminacy in endogenous growth models with environmental externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1156-1180, April.
    11. Anton B. T. M. Van Schaik & Henri L. F. De Groot, 1998. "Unemployment and Endogenous Growth," LABOUR, CEIS, vol. 12(2), pages 189-219, July.
    12. F. Butter & M. Hofkes, 1995. "Sustainable development with extractive and non-extractive use of the environment in production," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(4), pages 341-358, December.
    13. Elbasha, Elamin H. & Roe, Terry L., 1996. "On Endogenous Growth: The Implications of Environmental Externalities," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 240-268, September.
    14. Harrison, Sharon G., 2001. "Indeterminacy in a model with sector-specific externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 747-764, May.
    15. Søren Nielsen & Lars Pedersen & Peter Sørensen, 1995. "Environmental policy, pollution, unemployment, and endogenous growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 185-205, August.
    16. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    17. Buiter, Willem H, 1984. "Saddlepoint Problems in Continuous Time Rational Expectations Models: A General Method and Some Macroeconomic Examples," Econometrica, Econometric Society, vol. 52(3), pages 665-680, May.
    18. Matsusaka, John G & Sbordone, Argia M, 1995. "Consumer Confidence and Economic Fluctuations," Economic Inquiry, Western Economic Association International, vol. 33(2), pages 296-318, April.
    19. Xepapadeas, Anastasios, 2005. "Economic growth and the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 23, pages 1219-1271, Elsevier.
    20. Chung-Huang Huang & Deqin Cai, 1994. "Constant-returns endogenous growth with pollution control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(4), pages 383-400, August.
    21. Lans Bovenberg, A. & Smulders, Sjak, 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Journal of Public Economics, Elsevier, vol. 57(3), pages 369-391, July.
    22. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, December.
    23. Raymond Gradus & Sjak Smulders, 1993. "The trade-off between environmental care and long-term growth—Pollution in three prototype growth models," Journal of Economics, Springer, vol. 58(1), pages 25-51, February.
    24. Lai, Ching-Chong & Liao, Chih-Hsing, 2012. "Optimal nonlinear income taxation with productive government expenditure," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 66-77.
    25. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
    26. Farmer Roger E. A. & Guo Jang-Ting, 1994. "Real Business Cycles and the Animal Spirits Hypothesis," Journal of Economic Theory, Elsevier, vol. 63(1), pages 42-72, June.
    27. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448, Elsevier.
    28. Devereux, Michael B & Love, David R F, 1995. "The Dynamic Effects of Government Spending Policies in a Two-Sector Endogenous Growth Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 232-256, February.
    29. Sharon G. Harrison, 2005. "Do Sunspots Reflect Consumer Confidence? An Empirical Investigation," Eastern Economic Journal, Eastern Economic Association, vol. 31(1), pages 55-73, Winter.
    30. Burmeister, Edwin, 1980. "On Some Conceptual Issues in Rational Expectations Modeling," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 800-816, November.
    31. Jhy-yuan Shieh & Ching-chong Lai & Jhy-hwa Chen, 2001. "A Comment on Huang and Cai's Constant-Returns Endogenous Growth with Pollution Control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(2), pages 165-172, October.
    32. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
    33. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, vol. 35(2-3), pages 650-661, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tai, Meng-Yi & Chao, Chi-Chur & Hu, Shih-Wen, 2015. "Pollution, health and economic growth," The North American Journal of Economics and Finance, Elsevier, vol. 32(C), pages 155-161.
    2. Rafael Robina Ramírez & Manuel Pulido Fernández, 2018. "Religious Travellers’ Improved Attitude towards Nature," Sustainability, MDPI, vol. 10(9), pages 1-23, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Jhy-hwa & Shieh, Jhy-yuan & Chang, Juin-jen & Lai, Ching-chong, 2009. "Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 423-437, September.
    2. Chu, Hsun & Lai, Ching-chong, 2014. "Abatement R&D, market imperfections, and environmental policy in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 20-37.
    3. Jhy-hwa Chen & Ching-chong Lai & Jhy-yuan Shieh, 2003. "Anticipated Environmental Policy and Transitional Dynamics in an Endogenous Growth Model," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 233-254, June.
    4. Dagmar Nelissen & Till Requate, 2007. "Pollution-reducing and resource-saving technological progress," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 6(1), pages 5-44.
    5. Evangelos V. Dioikitopoulos & Sugata Ghosh & Eugenia Vella, 2016. "Technological Progress, Time Perception and Environmental Sustainability," Working Papers 2016002, The University of Sheffield, Department of Economics.
    6. Sjak Smulders, 1995. "Entropy, environment, and endogenous economic growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 319-340, August.
    7. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    8. Chen, Li-Ju & Lu, Lee-Jung & Tai, Meng-Yi & Hu, Shih-Wen & Wang, Vey, 2014. "Energy structure, energy policy, and economic sustainable development," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 203-210.
    9. Klarl, Torben, 2016. "Pollution externalities, endogenous health and the speed of convergence in an endogenous growth model," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 98-113.
    10. Juin‐Jen Chang & Jhy‐Hwa Chen & Jhy‐Yuan Shieh & Ching‐Chong Lai, 2009. "Optimal Tax Policy, Market Imperfections, and Environmental Externalities in a Dynamic Optimizing Macro Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 623-651, August.
    11. Smulders, Sjak & Gradus, Raymond, 1996. "Pollution abatement and long-term growth," European Journal of Political Economy, Elsevier, vol. 12(3), pages 505-532, November.
    12. Vella, Eugenia & Dioikitopoulos, Evangelos V. & Kalyvitis, Sarantis, 2015. "Green Spending Reforms, Growth, And Welfare With Endogenous Subjective Discounting," Macroeconomic Dynamics, Cambridge University Press, vol. 19(6), pages 1240-1260, September.
    13. Hyun Park & Apostolis Philippopoulos, 2016. "Environmental Ramsey Policy and Sustainable Balanced Growth," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 488-501, May.
    14. Fullerton, Don & Kim, Seung-Rae, 2008. "Environmental investment and policy with distortionary taxes, and endogenous growth," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 141-154, September.
    15. Mahmoud Hassan & Walid Oueslati & Damien Rousselière, 2020. "Exploring the link between energy based taxes and economic growth," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(1), pages 67-87, January.
    16. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January.
    17. Mónica Meireles & Isabel Soares & Óscar Afonso, 2010. "Economic Growth, Ecological Technology and Public Intervention," FEP Working Papers 378, Universidade do Porto, Faculdade de Economia do Porto.
    18. Chen Jhy-hwa & Shieh Jhy-yuan & Chang Juin-jen, 2015. "Environmental policy and economic growth: the macroeconomic implications of the health effect," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(1), pages 1-31, January.
    19. Gupta, Manash Ranjan & Barman, Trishita Ray, 2010. "Health, infrastructure, environment and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 32(2), pages 657-673, June.
    20. Renström, Thomas I & Marsiliani, Laura, 2003. "Inequality, Environmental Protection and Growth," CEPR Discussion Papers 3754, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Endogenous growth; Environmental consciousness; Macroeconomic instability; Pollution;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:34:y:2014:i:c:p:151-160. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.