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Natural Disasters in a Two-Sector Model of Endogenous Growth

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  • Masako Ikefuji

    ()
    (Graduate School of Economics, Osaka University)

  • Ryo Horii

    ()
    (Graduate School of Economics, Osaka University)

Abstract

This paper studies sustainability of economic growth considering the risk of natural disasters caused by pollution in an endogenous growth model with physical and human capital accumulation. We consider an environmental tax policy, and show that economic growth is sustainable only if the tax rate on the polluting input is increased over time and that the long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax. The social welfare is maximized under a positive steadystate growth in which faster accumulation of human capital compensates the productivity loss due to declining use of the polluting input.

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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 06-13.

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Length: 30 pages
Date of creation: May 2006
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Handle: RePEc:osk:wpaper:0613

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: natural disasters; human capital; endogenous depreciation; economic growth.;

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  2. Lord, William & Rangazas, Peter, 1998. "Capital Accumulation and Taxation in a General Equilibrium Model with Risky Human Capital," Journal of Macroeconomics, Elsevier, Elsevier, vol. 20(3), pages 509-531, July.
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  7. Grimaud, Andre & Rouge, Luc, 2003. "Non-renewable resources and growth with vertical innovations: optimum, equilibrium and economic policies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 433-453, March.
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  14. Groth, Christian & Schou, Poul, 2007. "Growth and non-renewable resources: The different roles of capital and resource taxes," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 80-98, January.
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  21. Palivos, Theodore & Wang, Ping & Zhang, Jianbo, 1997. "On the Existence of Balanced Growth Equilibrium," 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. 38(1), pages 205-24, February.
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Citations

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Cited by:
  1. Jasmin Katrin Gröschl, 2013. "Gravity Model Applications and Macroeconomic Perspectives," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, number 48, 8.
  2. Ryo Horii & Masako Ikefuji, 2014. "Environment and Growth," Working Papers, Fondazione Eni Enrico Mattei 2014.37, Fondazione Eni Enrico Mattei.
  3. Lucas Bretschger & Alexandra Vinogradova, 2014. "Growth and Mitigation Policies with Uncertain Climate Damage," CEEES Paper Series CE3S-02/14, European University at St. Petersburg, Department of Economics.
  4. Lucas Bretschger & Christos Karydas, 2013. "Optimum Growth and Carbon Policies with Lags in the Climate System," CER-ETH Economics working paper series 13/184, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  5. AKAO Ken-Ichi & SAKAMOTO Hiroaki, 2013. "A Theory of Disasters and Long-run Growth," Discussion papers, Research Institute of Economy, Trade and Industry (RIETI) 13061, Research Institute of Economy, Trade and Industry (RIETI).
  6. Gabriel J. Felbermayr & Jasmin Gröschl, 2013. "Naturally Negative: The Growth Effects of Natural Disasters," CESifo Working Paper Series 4439, CESifo Group Munich.

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