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The environmental and macroeconomic effects of socially responsible investment

  • Dam, Lammertjan
  • Heijdra, Ben J.

We analyze the effects of socially responsible investment and public abatement on environmental quality and the economy in a continuous-time dynamic growth model featuring optimizing households and firms. Environmental quality is modeled as a renewable resource. Consumers can invest in government bonds or firm equity. Since investors feel partly responsible for environmental pollution when holding firm equity, they require a premium on the return to equity. We show that socially responsible investment behavior by households partially offsets the positive effects on environmental quality of public abatement policies.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 35 (2011)
Issue (Month): 9 (September)
Pages: 1424-1434

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Handle: RePEc:eee:dyncon:v:35:y:2011:i:9:p:1424-1434
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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