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Environmental Policy and Growth in a Model with Endogenous Environmental Awareness

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  • Karine Constant

    ()
    (Aix- Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

  • Marion Davin

    ()
    (Aix- Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

Abstract

This paper examines the relationship between environmental policy and growth when green preferences are endogenously determined by education and pollution. The government can implement a tax on pollution and recycle the revenue in public pollution abatement and/or education subsidy (influencing green behaviors). When agent’s preferences for the environment are highly sensitive to environmental damages, the economy can converge to a balanced growth path equilibrium with damped oscillations. Therefore, we identify two objectives that environmental policy seeks to address: remove oscillations, source of intergenerational inequalities, and enhance the long-term growth rate. We show that a tighter tax allows to achieve both objectives when the tax revenue is well allocated between education and direct environmental protection.

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Bibliographic Info

Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1405.

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Length: 26 pages
Date of creation: Mar 2014
Date of revision: Mar 2014
Handle: RePEc:aim:wpaimx:1405

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Web page: http://www.amse-aixmarseille.fr/en
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Keywords: environmental policy; endogenous growth; environmental wareness; Education;

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  1. Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth: Pollution in three proto-type growth models," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-153405, Tilburg University.
  2. Thomas Seegmuller & Alban Verchere, 2002. "Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies," Working Papers of BETA 2002-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  3. Xavier Pautrel, 2009. "Environmental policy, education and growth: A reappraisal when lifetime is finite," Working Papers, HAL hal-00423201, HAL.
  4. repec:hal:journl:halshs-00089895 is not listed on IDEAS
  5. Prieur, Fabien & Bréchet, Thierry, 2013. "Can Education Be Good For Both Growth And The Environment?," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 17(05), pages 1135-1157, July.
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  14. Roland Menges & Carsten Schroeder & Stefan Traub, 2005. "Altruism, Warm Glow and the Willingness-to-Donate for Green Electricity: An Artefactual Field Experiment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 31(4), pages 431-458, 08.
  15. André Grimaud & Frederic Tournemaine, 2007. "Why can an environmental policy tax promote growth through the channel of education?," Working Papers, Institut National de la Recherche Agronomique, France 22635, Institut National de la Recherche Agronomique, France.
  16. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(401), pages 464-77, June.
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