Advanced Search
MyIDEAS: Login to save this paper or follow this series

Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth

Contents:

Author Info

  • Don Fullerton
  • Seung-Rae Kim

Abstract

Recent studies consider public R&D spending that affects abatement knowledge and endogenous growth, distortionary taxes that affect physical and human capital formation, pollution taxes that affect environmental degradation, and regeneration that restores natural capital. Our model combines all of those elements. We show how the combination affects results from each prior model, focusing on two parameters that represent the need for distorting taxes, and the productivity of abatement knowledge relative to pollution. First, either of these two extensions can reverse the prior finding that pollution tax revenue is more than enough to pay for public abatement R&D. Second, tax distortions and externalities substantially alter prior findings that the ratio of public to private capital is based only on output elasticities. Third, our dynamic model affects prior static findings about how other public spending "crowds out" provision of the environmental public good. Fourth, we show whether a greater need for public spending leads to greater increases in the distorting tax or pollution tax. Fifth, while prior research is optimistic that environmental regulation can boost economic growth, we show how it may increase or decrease the growth rate --even if it raises welfare.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w12070.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12070.

as in new window
Length:
Date of creation: Mar 2006
Date of revision:
Publication status: published as Fullerton, Don and S.R. Kim. “Environmental Investment and Policy with Distortionary Taxes and Endogenous Growth.” Journal of Environmental Economics and Management (September 2008).
Handle: RePEc:nbr:nberwo:12070

Note: PE EEE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Mino, Kazuo, 1996. "Analysis of a Two-Sector Model of Endogenous Growth with Capital Income Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 227-51, February.
  2. Metcalf, Gilbert E., 2003. "Environmental levies and distortionary taxation:: Pigou, taxation and pollution," Journal of Public Economics, Elsevier, Elsevier, vol. 87(2), pages 313-322, February.
  3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 500-521, June.
  4. Gaube Thomas, 2005. "Second-Best Pollution Taxation and Environmental Quality," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 1(1), pages 1-18, April.
  5. Smulders, J.A., 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Open Access publications from Tilburg University, Tilburg University urn:nbn:nl:ui:12-153411, Tilburg University.
  6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  7. Raymond Gradus & Sjak Smulders, 1993. "The trade-off between environmental care and long-term growth—Pollution in three prototype growth models," Journal of Economics, Springer, Springer, vol. 58(1), pages 25-51, February.
  8. Elbasha, Elamin H. & Roe, Terry L., 1995. "On Endogenous Growth: The Implications of Environmental Externalities," Bulletins, University of Minnesota, Economic Development Center 7493, University of Minnesota, Economic Development Center.
  9. Larry E. Jones & Rodolfo E. Manuelli, 1994. "The Sources of Growth," GE, Growth, Math methods, EconWPA 9410002, EconWPA, revised 05 Mar 1999.
  10. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 568, China Economics and Management Academy, Central University of Finance and Economics.
  11. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
  12. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(4), pages 645-61, October.
  13. Alfred Greiner & Horst Hanusch, 1998. "Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment," International Tax and Public Finance, Springer, Springer, vol. 5(3), pages 249-261, July.
  14. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(5), pages S103-26, October.
  15. Smulders, J.A. & Gradus, R.H.J.M., 1993. "Pollution abatement and long-term growth," Discussion Paper, Tilburg University, Center for Economic Research 1993-73, Tilburg University, Center for Economic Research.
  16. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, Elsevier, vol. 35(2-3), pages 650-661, April.
  17. Bovenberg, A.L. & Mooij, R.A. de, 1994. "Environmental tax reform and endogenous growth," Discussion Paper, Tilburg University, Center for Economic Research 1994-98, Tilburg University, Center for Economic Research.
  18. Bovenberg, A.L. & Smulders, J.A., 1994. "Transitional impact of environmental policy in an endogenous growth model," Discussion Paper, Tilburg University, Center for Economic Research 1994-50, Tilburg University, Center for Economic Research.
  19. Mohtadi, Hamid, 1996. "Environment, growth, and optimal policy design," Journal of Public Economics, Elsevier, Elsevier, vol. 63(1), pages 119-140, December.
  20. Nancy L. Stokey & Sergio Rebelo, 1993. "Growth Effects of Flat-Rate Taxes," NBER Working Papers 4426, National Bureau of Economic Research, Inc.
  21. Xepapadeas, Anastasios, 1997. "Economic development and environmental pollution: traps and growth," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 8(3), pages 327-350, August.
  22. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 485-517, June.
  23. Koichi Futagami & Kazuo Mino, 1995. "Public capital and patterns of growth in the presence of threshold externalities," Journal of Economics, Springer, Springer, vol. 61(2), pages 123-146, June.
  24. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, Elsevier, vol. 21(2-3), pages 195-232.
  25. Alfred Greiner, 2005. "Fiscal Policy In An Endogenous Growth Model With Public Capital And Pollution," The Japanese Economic Review, Japanese Economic Association, Japanese Economic Association, vol. 56(1), pages 67-84.
  26. Frank Hettich, 1998. "Growth effects of a revenue-neutral environmental tax reform," Journal of Economics, Springer, Springer, vol. 67(3), pages 287-316, October.
  27. Bovenberg, A.L. & Smulders, J.A., 1993. "Environmental quality and pollution-saving technological change in a two-sector endogenous growth model," Discussion Paper, Tilburg University, Center for Economic Research 1993-21, Tilburg University, Center for Economic Research.
  28. Glomm, Gerhard & Ravikumar, B., 1999. "Competitive equilibrium and public investment plans," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 23(8), pages 1207-1224, August.
  29. Louis Kaplow, 2004. "On the (Ir)Relevance of Distribution and Labor Supply Distortion to Government Policy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(4), pages 159-175, Fall.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Walid Oueslati, 2013. "Short and Long-term Effects of Environmental Tax Reform," Working Papers, Fondazione Eni Enrico Mattei 2013.09, Fondazione Eni Enrico Mattei.
  2. Chu, Hsun & Lai, Ching-chong, 2014. "Abatement R&D, market imperfections, and environmental policy in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 41(C), pages 20-37.
  3. Chu, Hsun & Lai, Ching-Chong & Cheng, Chu-Chuan, 2013. "Tax Havens, Growth, and Welfare," MPRA Paper 52878, University Library of Munich, Germany, revised Sep 2013.
  4. Alfredo Marvão Pereira & Rui M. Pereira, 2011. "On the environmental, economic and budgetary impacts of fossil fuel prices: A dynamic general equilibrium analysis of the Portuguese case," Working Papers, Department of Economics, College of William and Mary 110, Department of Economics, College of William and Mary.
  5. Xepapadeas, Anastasios, 2005. "Economic growth and the environment," Handbook of Environmental Economics, Elsevier, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 23, pages 1219-1271 Elsevier.
  6. Lopez, Ramon E. & Yoon, Sang Won, 2013. "Sustainable Economic Growth: Structural Transformation with Consumption Flexibility," Working Papers, University of Maryland, Department of Agricultural and Resource Economics 142561, University of Maryland, Department of Agricultural and Resource Economics.
  7. Jean-Louis Combes & Pascale Combes Motel & Alexandru Minea & Patrick Villieu, 2014. "Deforestation and Seigniorage in Developing Countries: A Tradeoff?," Working Papers, HAL halshs-00939273, HAL.
  8. Tang, Erzi & Liu, Fengchao & Zhang, Jingjing & Yu, Jiao, 2014. "A model to analyze the environmental policy of resource reallocation and pollution control based on firms' heterogeneity," Resources Policy, Elsevier, Elsevier, vol. 39(C), pages 88-91.
  9. Pascale Combes Motel & Johanna Choumert & Alexandru Minea & Thomas Sterner, 2014. "Explorations in the Environment–Development Dilemma," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 57(4), pages 479-485, April.
  10. Oueslati, Walid, 2014. "Environmental tax reform: Short-term versus long-term macroeconomic effects," Journal of Macroeconomics, Elsevier, Elsevier, vol. 40(C), pages 190-201.
  11. Minoru Nakada, 2010. "Environmental Tax Reform and Growth: Income Tax Cuts or Profits Tax Reduction," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 47(4), pages 549-565, December.
  12. Gregmar Galinato, . "The Challenge of Addressing Consumption Pollutants with Fiscal Policy," Working Papers, School of Economic Sciences, Washington State University 2014-1, School of Economic Sciences, Washington State University.
  13. Mónica Meireles & Isabel Soares & Óscar Afonso, 2010. "Economic Growth, Ecological Technology and Public Intervention," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 378, Universidade do Porto, Faculdade de Economia do Porto.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12070. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.