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Growth, pollution, policy!

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  • Hart, Rob

Abstract

We investigate long-run patterns in pollution flows in an optimally regulated, growing economy in which consumption and environmental quality are imperfectly substitutable and pollution is a by-product of production. We show that by-production implies that a scale effect will always drive increasing pollution when productivity is sufficiently low. On the other hand, if a clean technology exists it will always be chosen in the long run (hence emissions will approach zero) because for any strictly positive flow of pollution, willingness to pay to reduce that flow grows without bound as consumption grows without bound, whereas the cost of switching is bounded. We clarify the intuition using a specified model in which pollution arises as a by-product of the use of natural-resource inputs.

Suggested Citation

  • Hart, Rob, 2020. "Growth, pollution, policy!," European Economic Review, Elsevier, vol. 126(C).
    • Handle: RePEc:eee:eecrev:v:126:y:2020:i:c:s0014292120300878
    DOI: 10.1016/j.euroecorev.2020.103455
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    References listed on IDEAS

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    1. Lakhadar Adouka & Habib Ben Bayer, 2021. "The Relationship between Environmental Quality and Economic Growth: An Empirical Investigation Applied to the Case of Algeria (1970-2019)," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 22-41.

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    More about this item

    Keywords

    Economic growth; Pollution; Natural resources; Environmental Kuznets curve; Free disposability;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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