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Endogenous Growth with a Ceiling on the Stock of Pollution

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  • Kollenbach, Gilbert
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    Abstract

    The effects of an agreement such as the Kyoto Protocol, which implicitly imposes a ceiling on the stock of pollution, have recently been studied in Hotelling models. We add pollution and a ceiling to the endogenous growth model of \cite{tsur2005scarcity} to study the effects of the ceiling on capital accumulation and research investments. The ceiling increases the scarcity of the exhaustible resource in the short run, which boosts backstop utilization. This implies that R\&D becomes more beneficial compared with capital accumulation. How the short run development path of an economy is affected depends on its capital endowment or richness, respectively. Only economies which are neither too rich nor too poor may invest more into research. In the long run an economy with a ceiling follows basically the same long run development path as an economy without the ceiling.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 50641.

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    Date of creation: 14 Oct 2013
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    Handle: RePEc:pra:mprapa:50641

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    Keywords: Endogenous growth; Environmental agreements; Fossil fuels; Nonrenewable resources; Research and Development;

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    1. Ujjayant CHAKRAVORTY & Bertrand MAGNE & Michel MOREAUX, 2006. "Plafond de concentration en carbone et substitutions entre ressources énergétiques," Annales d'Economie et de Statistique, ENSAE, issue 81, pages 141-168.
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    12. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
    13. Yacov Tsur & Amos Zemel, 2009. "Endogenous Discounting and Climate Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 44(4), pages 507-520, December.
    14. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2012. "Cycles in nonrenewable resource prices with pollution and learning-by-doing," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1448-1461.
    15. Lafforgue, Gilles & Magné, Bertrand & Moreaux, Michel, 2006. "Optimal Sequestration Policy with a Ceiling on the Stock of Carbon in the Atmosphere," IDEI Working Papers 401, Institut d'Économie Industrielle (IDEI), Toulouse.
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