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When Environmental Policy Is Superfluous: Growth and Polluting Resources

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  • Schou, Poul

Abstract

In a research-driven endogenous growth model, a non-renewable resource gives rise to pollution. Consumption may either grow or decline along the optimal balanced growth path, but the (flow) pollution level necessarily diminishes continuously. Any positive balanced growth path is sustainable. Utility may improve, even though consumption declines. Although positive growth is optimal, the market economy may nevertheless result in permanently declining consumption possibilities. At the same time, a growth-enhancing government policy may improve long-un environmental conditions. The pollution externality does not distort the decisions of the market economy, so that a specific environmental policy is superfluous. Copyright 2002 by The editors of the Scandinavian Journal of Economics.

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  • Schou, Poul, 2002. " When Environmental Policy Is Superfluous: Growth and Polluting Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 605-620, December.
  • Handle: RePEc:bla:scandj:v:104:y:2002:i:4:p:605-20
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