Stochastic Pollution and Environmental Care in an Endogenous Growth Model
AbstractThis paper analyzes the impact of pollution and abatement policy within a stochastic endogenous growth model. The agents have environmental preferences, but they neglect their individual contribution to aggregate abatement. Therefore, environmental care is done by the government and financed via income taxation and government bonds. Equilibrium growth depends on environmental preferences, perception of aggregate capital and risk aversion. Environmental care as well as fiscal policy are analyzed. Due to environmental preferences and partial anticipation of the dependence between aggregate and individual capital, government debt influences equilibrium growth. Hence, income taxation has an additional indirect impact on accumulation through the simultaneous adjustment of portfolio choice. From numerical simulation it can be concluded that the optimal income tax rate decreases with the perception of the influence of individual on aggregate capital. In contrast, the impact of environmental preferences and uncertainty on optimal financing is ambiguous.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover with number dp-259.
Length: 23 pages
Date of creation: Aug 2002
Date of revision:
pollution; endogenous growth; uncertainty; taxation;
Other versions of this item:
- Susanne Soretz, 2003. "Stochastic Pollution and Environmental Care in an Endogenous Growth Model," Manchester School, University of Manchester, vol. 71(4), pages 448-469, 07.
- Susanne Soretz, 2002. "Stochastic Pollution and Environmental Care in an Endogenous Growth Model," Computing in Economics and Finance 2002 74, Society for Computational Economics.
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- D9 - Microeconomics - - Intertemporal Choice
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-08-19 (All new papers)
- NEP-DEV-2002-08-19 (Development)
- NEP-ENE-2002-08-19 (Energy Economics)
- NEP-PBE-2002-08-19 (Public Economics)
- NEP-RES-2002-08-19 (Resource Economics)
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