Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement
AbstractThis paper establishes a growth model where firms and residents in polluted areas bargain cooperatively to settle environmental concerns. While economic development affects the extent of the negotiation outcomes, the bargaining results also influence firms' incentive to undertake R&D and thus economic growth. Due to the opposing effects of production and matching technologies, an inverted-U relationship between pollution and growth is obtained. Contrasting to growth-promoting policies, policies that create barriers to firm entry or matching may reduce pollution harming growth. Due to the opposing effects of thick-matching versus effective-discounting and pollution-externality, the decentralized outcome may involve over or under-pollution.
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Bibliographic InfoPaper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0010.
Date of creation: Apr 2000
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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html
Bargaining; endogenous growth; environmental externality;
Find related papers by JEL classification:
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- D90 - Microeconomics - - Intertemporal Choice - - - General
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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