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The environment, the endogenous growth and the endogenous labour market

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  • Christophe Hemous

    (UP1 UFR02 - Université Paris 1, Panthéon-Sorbonne - UFR d'Économie - Université Paris I - Panthéon-Sorbonne - PRES HESAM)

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    Abstract

    In the framework of endogenous growth of Acemoglu & Aghion in "The environment and directed technical change", the paper aims at creating endogenous labor market and analyzing its effects on the environment and on the growth in the competitive equilibrium and the optimal policy. A final output is produced by two intermediary goods, one is "dirty" and the other is "clean". The "dirty" one lowers the quality of the environment. On the contrary to the initial model, we figure out the long term growth rate changes in both the competitive equilibrium and the optimal policy. As usual in the macroeconomics models with micro foundations, we find a threshold for the discount factor p when the asymptotic growth rate in competitive equilibrium is higher than in the optimal policy. Moreover, on the contrary to the initial paper, there is a case in which an environmental disaster can be avoided in competitive equilibrium when the expected enhanced productivity is not sufficiently high. Hence, there is no growth but also no disaster. In addition to the temporary policy instrument used in the initial paper, the social planner needs another subsidy which has to be permanent for incenting the workers to become scientists in the clean sector. Hence, on the contrary to the initial paper, the government intervention has to be permanent. Therefore, our results are less optimistic than those of Acemoglu & Aghion. Our results are close to Stern / Al Gore stance. Lastly, we find that if p is in the competitive equilibrium and therefore no possible degradation of the environment.

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    File URL: http://dumas.ccsd.cnrs.fr/docs/00/64/91/64/PDF/HEMOUS_Christophe.pdf
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    Paper provided by HAL in its series Post-Print with number dumas-00649164.

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    Date of creation: 30 Jun 2011
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    Handle: RePEc:hal:journl:dumas-00649164

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    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2010. "The Environment and Directed Technical Change," Working Papers 2010.93, Fondazione Eni Enrico Mattei.
    2. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
    3. Daron Acemoglu, 2001. "Directed Technical Change," NBER Working Papers 8287, National Bureau of Economic Research, Inc.
    4. William D. Nordhaus, 1992. "Lethal Model 2: The Limits to Growth Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 1-60.
    5. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, 09.
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