The timing of pollution abatement investments and the business cycle: an international comparison
AbstractIn this paper we develop a simple equilibrium business-cycle model for an economy with both clean-and dirty-producing plants. We derive that the optimal timing of cleaning the production process is during a slowdown of the economy. Due to external effects and market failures the timing of pollution abatement investments is not expected to be optimal in the real world. We test the optimality of the timing of those investments with data for Germany, the Netherlands and the U.S.A. It appears that for more than 25 percent of the sectors pollution abatement investments show counter-cyclical behaviour, while in only one sector these investments are pro-cyclical.
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Bibliographic InfoPaper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0033.
Date of creation: 1995
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business-cycle model; pollution abatement investments; cleaning production; environmental regulation;
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