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Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement

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Author Info
Chia-Ying Chang (Department of Economics, Vanderbilt University)
Chien-Chieh Huang (Department of Economics, National Dong-Hwa University, Taiwan)
Ping Wang () (Department of Economics, Vanderbilt University)

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Abstract

This 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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File URL: http://www.vanderbilt.edu/econ/wparchive/workpaper/vu00-w10.pdf
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File Function: First version, 2000
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Publisher Info
Paper provided by Department of Economics, Vanderbilt University in its series Working Papers with number 0010.

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Date of creation: May 1999
Date of revision: Apr 2000
Handle: RePEc:van:wpaper:0010

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Related research
Keywords: 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 and Growth - - - General
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

References listed on IDEAS
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  3. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
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    Other versions:
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  14. Laing, D. & Palivos, T. & Wang, P., 1995. "Vertical Innovation, Product Cycles and Endogenous Growth in Search Equilibrium," Papers 01-95-02, Pennsylvania State - Department of Economics.
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  16. Marsiliani, Laura & Renstrom, Thomas I, 2000. "Time Inconsistency in Environmental Policy: Tax Earmarking as a Commitment Solution," Economic Journal, Royal Economic Society, vol. 110(462), pages C123-38, March. [Downloadable!] (restricted)
  17. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November. [Downloadable!] (restricted)
  18. Shibata, Hirofumi, 1971. "A Bargaining Model of the Pure Theory of Public Expenditure," Journal of Political Economy, University of Chicago Press, vol. 79(1), pages 1-29, Jan.-Feb.. [Downloadable!] (restricted)
  19. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May. [Downloadable!] (restricted)
    Other versions:
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