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Environmental quality, public debt and economic development

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  • Mouez Fodha

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Thomas Seegmuller

    ()
    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - École des Hautes Études en Sciences Sociales (EHESS) - CNRS : UMR6579)

Abstract

This article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt. A public sector of pollution abatement is financed by a tax and/or public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental-poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00555625.

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Date of creation: 14 Jan 2011
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Handle: RePEc:hal:cesptp:halshs-00555625

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Keywords: Environmental policies; pollution abatement; public debt; economic development; poverty trap;

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  1. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(2), pages 223-47, April.
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  13. Pierre-André Jouvet & Pierre Pestieau & Gregory Ponthiere, 2010. "Longevity and environmental quality in an OLG model," Journal of Economics, Springer, Springer, vol. 100(3), pages 191-216, July.
  14. Hansen, Stein, 1989. "Debt for nature swaps -- Overview and discussion of key issues," Ecological Economics, Elsevier, Elsevier, vol. 1(1), pages 77-93, February.
  15. Xavier Pautrel, 2006. "Reconsidering The Impact of Environment on Long-Run Growth When Pollution Influences Health and Agents Have Finite-Lifetime," Working Papers, Fondazione Eni Enrico Mattei 2006.93, Fondazione Eni Enrico Mattei.
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Cited by:
  1. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," AMSE Working Papers 1431, Aix-Marseille School of Economics, Marseille, France, revised Jun 2014.

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