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A Positive Model of Growth and Pollution Controls

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  • Jones, L.E.

Abstract

The most recent addition to the economics of gloom concerns the interplay between income and environmental degradation. The main question raised is whether or not continued environmental degradation is a necessary part of the process of industrialization. Will pollution continue to increase without bound as more and more countries pass through the development phase or will it be controlled? Intuitively, if 'clean air' is a normal good, we would expect that societies might be 'self-regulating' in the sense that as income increases, pollution controls also increase. However, this intuition is somewhat misleading as the presence of external effects is an essential feature of environmental regulation. This paper describes a growth model in which pollutants are internal to a jurisdiction. To this end we develop a model of the joint determination of the rate of development of the economy through market interactions and the extent of pollution regulation through collective decision making. We show that depending on the collective decision making mechanism in place, the time path of pollution can display an inverted U shape, a 'sideways mirrored' S, or an increasing (but bounded) level over time. This paper contributes to the literature on both the large differences in income per capita across countries as well as the discrepancies in their growth rates. It shows that by relying on collective decision making mechanisms to choose policies, the dynamics of convex models can resemble those usually ascribed to models of multiple equilibria.

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Bibliographic Info

Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9513.

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Length: pages
Date of creation: 1995
Date of revision:
Handle: RePEc:att:wimass:9513

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Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

Related research

Keywords: POLLUTION; ECONOMIC GROWTH; MODELS; ENVIRONMENT;

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References

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  1. Eric Fisher & Charles van Marrewijk, 1997. "Pollution and Economic Growth," Working Papers 004, Ohio State University, Department of Economics.
  2. Nancy L. Stokey, 1990. "Human Capital, Product Quality, and Growth," Discussion Papers 883, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Glomm, Gerhard & Ravikumar, B., 1996. "Endogenous public policy and multiple equilibria," European Journal of Political Economy, Elsevier, vol. 11(4), pages 653-662, April.
  4. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  5. Easterly, William, 1994. "Economic stagnation, fixed factors, and policy thresholds," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 525-557, June.
  6. Low, P., 1992. "International Trade and the Environment," World Bank - Discussion Papers 159, World Bank.
  7. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  8. Boldrin, Michele, 1992. "Dynamic externalities, multiple equilibria, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 198-218, December.
  9. Gene M. Grossman & Alan B. Krueger, 1991. "Environmental Impacts of a North American Free Trade Agreement," NBER Working Papers 3914, National Bureau of Economic Research, Inc.
  10. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  11. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  12. Larry E. Jones & Rodolfo E. Manuelli, 1990. "Finite Lifetimes and Growth," NBER Working Papers 3469, National Bureau of Economic Research, Inc.
  13. Gene M. Grossman & Alan B. Krueger, 1994. "Economic Growth and the Environment," NBER Working Papers 4634, National Bureau of Economic Research, Inc.
  14. Stokey, Nancy L, 1988. "Learning by Doing and the Introduction of New Goods," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 701-17, August.
  15. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
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