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The timing of pollution abatement investments and the business cycle: an international comparison

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  • Bouman, M.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Gautier, P. A.
  • Hofkes, M.W.

Abstract

In 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 Info

Paper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0033.

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Date of creation: 1995
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Handle: RePEc:dgr:vuarem:1995-33

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Web page: http://www.feweb.vu.nl

Related research

Keywords: business-cycle model; pollution abatement investments; cleaning production; environmental regulation;

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  1. Caballero, Ricardo J, 1992. "A Fallacy of Composition," American Economic Review, American Economic Association, vol. 82(5), pages 1279-92, December.
  2. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  3. King, Robert G. & Rebelo, Sergio T., 1993. "Low frequency filtering and real business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 17(1-2), pages 207-231.
  4. Bean, C., 1989. "Endogenous Growth And The Procyclical Behaviour Of Productivity," Papers 369, London School of Economics - Centre for Labour Economics.
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