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Endogenous policy choice: the case of pollution and growth

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Author Info
Larry E. Jones
Rodolfo E. Manuelli

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Abstract

What determines the relationship between pollution and growth? Are the forces that explain the behavior over time of these quantities potentially useful to understand more generally the relationship between policies and growth? In this paper, we make a first attempt to analyze the equilibrium behavior of two quantities—the level of pollution and the level of income—in a setting in which societies choose, via voting, how much to regulate pollution. Our major finding is that, consistent with the evidence, the relationship between pollution and growth need not be monotone and that the precise equilibrium nature of the relationship between the two variables depends on whether individuals vote over effluent charges or directly restrict the choice of technology. Moreover, our analysis of the pollution problem suggests that, more generally, endogenous policy choices should be taken seriously as potential sources of heterogeneity when studying cross country differences in economic performance.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 276.

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Date of creation: 2000
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Handle: RePEc:fip:fedmsr:276

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
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  3. Cho, Dongchul, 1996. "An Alternative Interpretation of Conditional Convergence Results," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 669-81, November. [Downloadable!] (restricted)
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  5. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  6. D Quah, 1996. "Convergence," CEP Discussion Papers 0290, Centre for Economic Performance, LSE. [Downloadable!]
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  9. 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 813-34, August.
  10. Eric Fisher & Charles van Marrewijk, 1997. "Pollution and Economic Growth," Working Papers 004, Ohio State University, Department of Economics. [Downloadable!]
  11. Easterly, William, 1994. "Economic stagnation, fixed factors, and policy thresholds," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 525-557, June. [Downloadable!] (restricted)
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  12. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January. [Downloadable!] (restricted)
  13. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
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  14. Boldrin, Michele, 1992. "Dynamic externalities, multiple equilibria, and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 198-218, December. [Downloadable!] (restricted)
  15. Jones, Larry E. & Manuelli, Rodolfo E., 1992. "Finite lifetimes and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 171-197, December. [Downloadable!] (restricted)
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  16. Levinson, Arik, 1996. "Environmental regulations and manufacturers' location choices: Evidence from the Census of Manufactures," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 5-29, October. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hubert Kempf & stéphane Rossignol, 2005. "Is inequality harmful for the environment in a growing economy ?," Cahiers de la Maison des Sciences Economiques v06045, Université Panthéon-Sorbonne (Paris 1), revised May 2006. [Downloadable!]
    Other versions:
  2. William A. Brock & M. Scott Taylor, 2004. "Economic Growth and the Environment: A Review of Theory and Empirics," NBER Working Papers 10854, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Annegrete Bruvoll, Taran Fæhn and Birger Strøm, 2003. "Quantifying Central Hypotheses on Environmental Kuznets Curves for a Rich Economy: A Computable General Equilibrium Study," Discussion Papers 341, Research Department of Statistics Norway. [Downloadable!]
    Other versions:
  4. Annegrete Bruvoll and Taran Fæhn, 2004. "Transboundary environmental policy effects: Markets and emission leakages," Discussion Papers 384, Research Department of Statistics Norway. [Downloadable!]
  5. Hannes Egli, 2005. "A new approach to pollution modelling in models of the environmental Kuznets curve," Economics working paper series 05/39, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
    Other versions:
  6. Marzio Galeotti, 2003. "Environment and Economic Growth: Is Technical Change the Key to Decoupling?," Working Papers 2003.90, Fondazione Eni Enrico Mattei. [Downloadable!]
  7. Soretz, Susanne, 2002. "Stochastic Pollution and Environmental Care in an Endogenous Growth Model," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover dp-259, Universität Hannover, Wirtschaftswissenschaftliche Fakultät. [Downloadable!]
    Other versions:
  8. Marsiliani, Laura & Renström, Thomas I, 2003. "Inequality, Environmental Protection and Growth," CEPR Discussion Papers 3754, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Eriksson, Clas & Persson, Joakim, 2002. "Economic Growth, Inequality, Democratization, and the Environment," Working Paper Series 178, Trade Union Institute for Economic Research. [Downloadable!]
  10. J. Aznar-Márquez & J. R. Ruiz-Tamarit, . "Non-Catastrophic Endogenous Growth and the Environmental Kuznets Curve," Working Papers 2004-15, FEDEA. [Downloadable!]
  11. Laura Marsiliani & Thomas Renstrom, 2002. "Inequality, Environmental Protection and Growth," Wallis Working Papers WP35, University of Rochester - Wallis Institute of Political Economy. [Downloadable!]
  12. repec:att:wimass:192038 is not listed on IDEAS
  13. Clas Eriksson & Joakim Persson, 2003. "Economic Growth, Inequality, Democratization, and the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(1), pages 1-16, May. [Downloadable!] (restricted)
  14. W.A. Brock & M. Scott Taylor, 2003. "The Kindergarten Rule of Sustainable Growth," Public Economics 0303005, EconWPA. [Downloadable!]
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  15. J., AZNAR-MARQUEZ & Jose-Ramon, RUIZ-TAMARIT, 2005. "Demographic Transition Environmental Concern and the Kuznets Curve," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2005001, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  16. repec:att:wimass:1920316 is not listed on IDEAS
  17. George Economides & Apostolis Philippopoulos, 2008. "Growth enhancing policy is the means to sustain the environment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 207-219, January. [Downloadable!] (restricted)
  18. George Economides & Apostolis Philippopoulos, 2005. "Should Green Governments Give Priority to Environmental Policies over Growth-Enhancing Policies?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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