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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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References

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  1. Seegmuller, Thomas & Verchere, Alban, 2004. "Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies," Economics Letters, Elsevier, vol. 84(3), pages 363-369, September.
  2. 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 urn:nbn:nl:ui:12-153405, Tilburg University.
  3. Mariani, Fabio & Pérez-Barahona, Agustín & Raffin, Natacha, 2010. "Life expectancy and the environment," Journal of Economic Dynamics and Control, Elsevier, vol. 34(4), pages 798-815, April.
  4. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
  5. Tetsuo Ono, 2003. "Environmental tax policy in a model of growth cycles," Economic Theory, Springer, vol. 22(1), pages 141-168, 08.
  6. Grimaud, André & Tournemaine, Frédéric, 2006. "Why can an environmental policy tax promote growth through the channel of education?," IDEI Working Papers 676, Institut d'Économie Industrielle (IDEI), Toulouse.
  7. Ingmar Schumacher & Benteng Zou, 2013. "Threshold Preferences and the Environment," Working Papers 484, Bielefeld University, Center for Mathematical Economics.
  8. Matthew Kotchen & Michael Moore, 2007. "Conservation: From Voluntary Restraint to a Voluntary Price Premium," NBER Working Papers 13678, National Bureau of Economic Research, Inc.
  9. Xavier Pautrel, 2011. "Abatement Technology and the Environment-Growth Nexus with Education," Working Papers 2011.25, Fondazione Eni Enrico Mattei.
  10. 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, vol. 31(4), pages 431-458, 08.
  11. Tetsuo Ono, 2003. "Environmental Tax Policy and Long-Run Economic Growth," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 203-217.
  12. Riber, D.C. & Wilhelm, M.O., 1996. "Altruistic and Joy-of-Giving Motivations in Charitable Behavior," Papers 1-96-4, Pennsylvania State - Department of Economics.
  13. Xavier Pautrel, 2008. "Environmental Policy, Education and Growth: A Reappraisal when Lifetime Is Finite," Working Papers 2008.57, Fondazione Eni Enrico Mattei.
  14. Junxi Zhang, 1999. "Environmental sustainability, nonlinear dynamics and chaos," Economic Theory, Springer, vol. 14(2), pages 489-500.
  15. Chiroleu-Assouline, Mireille & Fodha, Mouez, 2006. "Double dividend hypothesis, golden rule and welfare distribution," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 323-335, May.
  16. BRECHET, Thierry & PRIEUR, Fabien, 2009. "Can education be good for both growth and the environment?," CORE Discussion Papers 2009019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. repec:hal:journl:halshs-00089895 is not listed on IDEAS
  18. Blackburn, Keith & Cipriani, Giam Pietro, 2002. "A model of longevity, fertility and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 187-204, February.
  19. Lawrence Goulder, 1995. "Environmental taxation and the double dividend: A reader's guide," International Tax and Public Finance, Springer, vol. 2(2), pages 157-183, August.
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