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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Chia-Ying Chang & Chien-Chieh Huang & Ping Wang, 2000. "Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement," Vanderbilt University Department of Economics Working Papers 0010, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0010
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Bargaining; endogenous growth; environmental externality;
    All these keywords.

    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 - - Micro-Based Behavioral Economics - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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