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Environmental policy in a two sector endogenous growth model

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  • Hettich, Frank
  • Svane, Minna Selene

Abstract

This paper analyses policy measures within a two sector endogenously growing economy with pollution. Pollution is either generated by production or by the use of physical capital in production, and can be reduced by public abatement activities. In this generalized Uzawa-Lucas model, the effects of fiscal policy are derived for all core variables and ratios. In addition, the optimal taxation rules are derived. If a pollution tax is not available it turns out that a first best solution may be reached by use of factor income taxation. Additionally, the effects and the possibility of environmental policy are complemented for a small open economy.

Suggested Citation

  • Hettich, Frank & Svane, Minna Selene, 1998. "Environmental policy in a two sector endogenous growth model," Discussion Papers, Series I 290, University of Konstanz, Department of Economics.
    • Handle: RePEc:zbw:kondp1:290
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    References listed on IDEAS

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    Cited by:

    1. Hettich, Frank, 2000. "The implications of international cooperation for economic growth, environmental quality and welfare," Wirtschaftswissenschaftliche Diskussionspapiere 08/2000, University of Greifswald, Faculty of Law and Economics.

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    More about this item

    Keywords

    endogenous growth; environmental externality; optimal taxation; international capital mobility;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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