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Why can an environmental policy tax promote growth through the channel of education?

  • Grimaud, Andre
  • Tournemaine, Frederic

This paper examines the implications of an environmental policy for growth performances. We develop a model where growth is driven by human capital accumulation. Firms invest in research to develop new technologies to reduce their pollution emissions and education is treated as product which not only enhances the productivity of individuals but also enters in their preferences. We find that a tighter environmental policy can promote growth. The reason is that a higher tax on pollution drives the prices of goods whose production is polluting up. This, in turn, enhances the willingness of individuals to acquire education.

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Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 62 (2007)
Issue (Month): 1 (April)
Pages: 27-36

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Handle: RePEc:eee:ecolec:v:62:y:2007:i:1:p:27-36
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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