Natural Disasters in a Two-Sector Model of Endogenous Growth
AbstractUsing an endogenous growth model with physical and human capital accumulation, this paper considers the sustainability of economic growth when the use of a polluting input (e.g., fossil fuels) intensi.es the risk of capital destruction through natural disasters. We .nd that growth is sustainable only if the tax rate on the polluting input increases over time. The long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax, and it is maximized by the least aggressive tax policy from among those that asymptotically eliminate the use of polluting inputs. Moreover, welfare is maximized under an even milder environmental tax policy, especially when the pollutants accumulate gradually.
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Bibliographic InfoPaper provided by Yale University, Department of Economics in its series Working Papers with number 86.
Date of creation: Nov 2010
Date of revision:
Other versions of this item:
- Ikefuji, Masako & Horii, Ryo, 2012. "Natural disasters in a two-sector model of endogenous growth," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 784-796.
- Ryo Horii & Masako Ikefuji, 2010. "Natural Disasters in a Two-Sector Model of Endogenous Growth," Working Papers 992, Economic Growth Center, Yale University.
- Masako Ikefuji & Ryo Horii, 2006. "Natural Disasters in a Two-Sector Model of Endogenous Growth," Discussion Papers in Economics and Business 06-13, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
- Ikefuji, Masako & Horii, Ryo, 2012. "Natural disasters in a two-sector model of endogenous growth," MPRA Paper 37825, University Library of Munich, Germany.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-DGE-2011-02-05 (Dynamic General Equilibrium)
- NEP-ENV-2011-02-05 (Environmental Economics)
- NEP-FDG-2011-02-05 (Financial Development & Growth)
- NEP-MIC-2011-02-05 (Microeconomics)
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