IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor

  • Chen, Jhy-hwa
  • Shieh, Jhy-yuan
  • Chang, Juin-jen
  • Lai, Ching-chong

This paper sets up a simple endogenous growth model that highlights the importance of the endogenous labor-leisure choice and the allocation between production labor and abatement labor. We show that, in contrast to the common notion (e.g. [Bovenberg, A.L., Smulders, S., 1996. Transitional impacts of environmental policy in an endogenous growth model. International Economic Review 37, 861-893] and [Bovenberg, A.L., de Mooij, R.A., 1997. Environmental tax reform and endogenous growth. Journal of Public Economics 63, 207-237]), the existence of an environmental production externality is a sufficient (but not necessary) condition for environmental policies to stimulate economic growth if the labor-leisure choice is endogenously determined. In particular, since there are complementarities between public abatement and private abatement, the public abatement expenditure will have a more powerful enhancing effect on economic growth when it is accompanied by more efficient private abatement. This result also leads to a corollary to the effect that it is easier to achieve double dividends in terms of enhancing both growth and welfare if the endogenous labor-leisure choice is taken into account. In our dynamic analysis, we show that if public abatement is substantially large, dynamic indeterminacy may occur despite the absence of a positive labor externality and interestingly, this is more likely to be the case when abatement labor plays a more significant role. Besides, the transitional effects of an increase in public abatement are also investigated.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/B6X4M-4TT9GCC-1/2/560a3d77ed76e1e6d3d9fcbee71fac77
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 31 (2009)
Issue (Month): 3 (September)
Pages: 423-437

as
in new window

Handle: RePEc:eee:jmacro:v:31:y:2009:i:3:p:423-437
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:ner:tilbur:urn:nbn:nl:ui:12-74434 is not listed on IDEAS
  2. Smulders, J.A. & Gradus, R.H.J.M., 1993. "Pollution abatement and long-term growth," Discussion Paper 1993-73, Tilburg University, Center for Economic Research.
  3. repec:ner:tilbur:urn:nbn:nl:ui:12-152985 is not listed on IDEAS
  4. F. Butter & M. Hofkes, 1995. "Sustainable development with extractive and non-extractive use of the environment in production," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(4), pages 341-358, December.
  5. Butter, F.A.G. den & Hofkes, M.W., 1993. "Sustainable development with extractive and non-extractive use of the environment in production," Serie Research Memoranda 0055, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  6. Eric Fisher & Charles van Marrewijk, 1997. "Pollution and Economic Growth," Working Papers 004, Ohio State University, Department of Economics.
  7. Elbasha, Elamin H. & Roe, Terry L., 1996. "On Endogenous Growth: The Implications of Environmental Externalities," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 240-268, September.
  8. Schneider, Kerstin, 1997. " Involuntary Unemployment and Environmental Policy: The Double Dividend Hypothesis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 45-49, March.
  9. Benhabib Jess & Farmer Roger E. A., 1994. "Indeterminacy and Increasing Returns," Journal of Economic Theory, Elsevier, vol. 63(1), pages 19-41, June.
  10. Lans Bovenberg, A. & de Mooij, Ruud A., 1997. "Environmental tax reform and endogenous growth," Journal of Public Economics, Elsevier, vol. 63(2), pages 207-237, January.
  11. van Schaik, A.B.T.M. & de Groot, H.L.F., 1995. "Unemployment and endogenous growth," Discussion Paper 1995-75, Tilburg University, Center for Economic Research.
  12. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-89, September.
  13. Stephen Turnovsky, 1998. "Fiscal Policy, Elastic Labor Supply, and Endogenous Growth," Discussion Papers in Economics at the University of Washington 0068, Department of Economics at the University of Washington.
  14. Mohtadi, Hamid, 1996. "Environment, growth, and optimal policy design," Journal of Public Economics, Elsevier, vol. 63(1), pages 119-140, December.
  15. Buiter, W, 1982. "Saddlepoint Problems in Continuous Time Rational Expectations Models : A General Method and Some Macroeconomic Examples," The Warwick Economics Research Paper Series (TWERPS) 200, University of Warwick, Department of Economics.
  16. Ligthart, Jenny E. & van der Ploeg, Frederick, 1994. "Pollution, the cost of public funds and endogenous growth," Economics Letters, Elsevier, vol. 46(4), pages 339-349, December.
  17. Stephen J. Turnovsky, 2000. "Methods of Macroeconomic Dynamics, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262201232, June.
  18. Bovenberg, A.L. & Smulders, J.A., 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Other publications TiSEM 6784bb12-71fb-45a5-bf7e-8, School of Economics and Management.
  19. Benhabib Jess & Perli Roberto, 1994. "Uniqueness and Indeterminacy: On the Dynamics of Endogenous Growth," Journal of Economic Theory, Elsevier, vol. 63(1), pages 113-142, June.
  20. repec:ner:tilbur:urn:nbn:nl:ui:12-153411 is not listed on IDEAS
  21. repec:ner:tilbur:urn:nbn:nl:ui:12-376258 is not listed on IDEAS
  22. Strand, J., 1996. "Pollution Taxation and Revenue Recycling Under Monopoly Unions," Memorandum 16/1996, Oslo University, Department of Economics.
  23. Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth : Pollution in three proto-type growth models," Other publications TiSEM f3ec6de7-f996-4ac0-b872-0, School of Economics and Management.
  24. Oueslati, Walid, 2002. "Environmental policy in an endogenous growth model with human capital and endogenous labor supply," Economic Modelling, Elsevier, vol. 19(3), pages 487-507, May.
  25. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
  26. Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 593-610, September.
  27. Byrne, Margaret M., 1997. "Is growth a dirty word? Pollution, abatement and endogenous growth," Journal of Development Economics, Elsevier, vol. 54(2), pages 261-284, December.
  28. Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-93, November.
  29. Alfred Greiner & Horst Hanusch, 1998. "Growth and Welfare Effects of Fiscal Policy in an Endogenous Growth Model with Public Investment," International Tax and Public Finance, Springer, vol. 5(3), pages 249-261, July.
  30. Poul Schou, 2002. "Pollution Externalities in a Model of Endogenous Fertility and Growth," International Tax and Public Finance, Springer, vol. 9(6), pages 709-725, November.
  31. repec:ner:tilbur:urn:nbn:nl:ui:12-73103 is not listed on IDEAS
  32. repec:ner:tilbur:urn:nbn:nl:ui:12-72815 is not listed on IDEAS
  33. Burmeister, Edwin, 1980. "On Some Conceptual Issues in Rational Expectations Modeling," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 800-816, November.
  34. Duranton, Gilles, 2001. "Endogenous labor supply, growth and overlapping generations," Journal of Economic Behavior & Organization, Elsevier, vol. 44(3), pages 295-314, March.
  35. Frank Hettich, 1998. "Growth effects of a revenue-neutral environmental tax reform," Journal of Economics, Springer, vol. 67(3), pages 287-316, October.
  36. Chung-Huang Huang & Deqin Cai, 1994. "Constant-returns endogenous growth with pollution control," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(4), pages 383-400, August.
  37. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, vol. 35(2-3), pages 650-661, April.
  38. Eriksson, Clas, 1996. "Economic growth with endogenous labour supply," European Journal of Political Economy, Elsevier, vol. 12(3), pages 533-544, November.
  39. Søren Nielsen & Lars Pedersen & Peter Sørensen, 1995. "Environmental policy, pollution, unemployment, and endogenous growth," International Tax and Public Finance, Springer, vol. 2(2), pages 185-205, August.
  40. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:31:y:2009:i:3:p:423-437. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.