Pollution and Economic Growth
AbstractWe analyse a model of overlapping generations in which clean air, a pure public good, is used as a private input into production. Although production exhibits constant returns to scale. endogenous growth can occur. In a laissez-faire equilibrium, firms generate rents that are the value of the pollution they create. These rents crowd out investment and slow economic growth. Such an equilibrium may not support Pareto optimal allocations, but a Pigouvian tax does. Hence, a pollution tax can yield a double dividend because it reduces pollution and increases growth.
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Bibliographic InfoPaper provided by Ohio State University, Department of Economics in its series Working Papers with number 004.
Date of creation: Mar 1997
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Other versions of this item:
- Eric O'N. Fisher & Charles van Marrewijk, 1998. "Pollution and economic growth," Journal of International Trade & Economic Development, Taylor and Francis Journals, vol. 7(1), pages 55-69.
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