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Natural Disasters in a Two-Sector Model of Endogenous Growth

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Author Info

  • Ryo Horii

    ()
    (Department of Economics, Yale University)

  • Masako Ikefuji

    ()
    (Institute for Social and Economic Research, Osaka University)

Abstract

This paper studies sustainability of economic growth considering the risk of natural disasters caused by pollution in an endogenous growth model with physical and human capital accumulation. It is shown that economic growth is sustainable only if the tax rate on the polluting input is increased over time and that the long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax. The social welfare is maximized under a positive steady-state growth in which faster accumulation of human capital compensates the productivity loss due to declining use of the polluting input.

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File URL: http://www.econ.yale.edu/growth_pdf/cdp992.pdf
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Bibliographic Info

Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 992.

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Length: 39 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:egc:wpaper:992

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Related research

Keywords: human capital; global warming; environmental tax; endogenous depreciation; nonbalanced growth path;

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References

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  1. Tsur, Yacov & Zemel, Amos, 2005. "Scarcity, growth and R&D," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 484-499, May.
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  15. Lans Bovenberg, A. & Smulders, Sjak, 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Journal of Public Economics, Elsevier, vol. 57(3), pages 369-391, July.
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  17. Hartman, Richard & Kwon, O-Sung, 2005. "Sustainable growth and the environmental Kuznets curve," Journal of Economic Dynamics and Control, Elsevier, vol. 29(10), pages 1701-1736, October.
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Citations

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Cited by:
  1. Horii, Ryo & Ikefuji, Masako, 2014. "Environment and Growth," MPRA Paper 53624, University Library of Munich, Germany.
  2. Gabriel J. Felbermayr & Jasmin Gröschl, 2013. "Naturally Negative: The Growth Effects of Natural Disasters," CESifo Working Paper Series 4439, CESifo Group Munich.
  3. AKAO Ken-Ichi & SAKAMOTO Hiroaki, 2013. "A Theory of Disasters and Long-run Growth," Discussion papers 13061, Research Institute of Economy, Trade and Industry (RIETI).
  4. Lucas Bretschger & Christos Karydas, 2013. "Optimum Growth and Carbon Policies with Lags in the Climate System," CER-ETH Economics working paper series 13/184, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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