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Environmental Pollution, Informal Sector, Public Expenditure And Economic Growth

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  • GUPTA, MANASH RANJAN
  • BARMAN, TRISHITA RAY

Abstract

The impact of environmental pollution on productivity is analyzed in a dynamic two commodity model consisting of a formal sector and an informal sector. Environmental quality and public infrastructural expenditure affect productivity of private inputs in both sectors. Both the sectors pollute environment and receive the benefits of public expenditure on abatement and infrastructure but the burden of tax is imposed only on the formal sector. Properties of the steady-state growth equilibrium and of the second-best optimum fiscal policy are analyzed. The socially optimal relative size of the informal sector is less than its second-best optimal relative size in the decentralized competitive equilibrium.

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  • Gupta, Manash Ranjan & Barman, Trishita Ray, 2015. "Environmental Pollution, Informal Sector, Public Expenditure And Economic Growth," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 73-91, June.
    • Handle: RePEc:hit:hitjec:v:56:y:2015:i:1:p:73-91
    DOI: 10.15057/27193
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    More about this item

    Keywords

    endogenous growth; informal sector; public expenditure; environmental pollution; abatement expenditure;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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