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Pollution and economic growth

Author

Listed:
  • Eric O'N. Fisher
  • Charles van Marrewijk

Abstract

We analyse a model of overlapping generations in which clean air, a pure public good, is used as a private input into production. Although production exhibits constant returns to scale. endogenous growth can occur. In a laissez-faire equilibrium, firms generate rents that are the value of the pollution they create. These rents crowd out investment and slow economic growth. Such an equilibrium may not support Pareto optimal allocations, but a Pigouvian tax does. Hence, a pollution tax can yield a double dividend because it reduces pollution and increases growth.

Suggested Citation

  • Eric O'N. Fisher & Charles van Marrewijk, 1998. "Pollution and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(1), pages 55-69.
  • Handle: RePEc:taf:jitecd:v:7:y:1998:i:1:p:55-69
    DOI: 10.1080/09638199800000004
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    Cited by:

    1. Abdullah, Sabah & Morley, Bruce, 2014. "Environmental taxes and economic growth: Evidence from panel causality tests," Energy Economics, Elsevier, vol. 42(C), pages 27-33.
    2. Chia-Ying Chang & Chien-Chieh Huang & Ping Wang, 2000. "Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement," Vanderbilt University Department of Economics Working Papers 0010, Vanderbilt University Department of Economics.
    3. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    4. Joan Canton & Ariane Labat & Anton Roodhuijzen, 2010. "An indicator-based assessment framework to identify country-specific challenges towards greener grow," European Economy - Economic Papers 2008 - 2015 401, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Tetsuo Ono, 2007. "Environmental Tax Reform, Economic Growth, and Unemployment in an OLG Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 133-161, March.
    6. Tetsuo Ono, 2002. "The Effects of Emission Permits on Growth and the Environment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 75-87, January.
    7. Marsiliani, L. & Renstrom, T.I., 2000. "Inequality, Environmental Protection and Growth," Discussion Paper 2000-34, Tilburg University, Center for Economic Research.
    8. Larry E. Jones & Rodolfo E. Manuelli, 2001. "Endogenous Policy Choice: The Case of Pollution and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 369-405, July.
    9. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," AMSE Working Papers 1431, Aix-Marseille School of Economics, Marseille, France, revised Jun 2014.
    10. Jones, L.E., 1995. "A Positive Model of Growth and Pollution Controls," Working papers 9513, Wisconsin Madison - Social Systems.
    11. Chen, Jhy-hwa & Shieh, Jhy-yuan & Chang, Juin-jen & Lai, Ching-chong, 2009. "Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor," Journal of Macroeconomics, Elsevier, vol. 31(3), pages 423-437, September.
    12. Suzuki, Tomo, 2007. "A history of Japanese accounting reforms as a microfoundation of the democratic socio-economy: Accountics Part II," Accounting, Organizations and Society, Elsevier, vol. 32(6), pages 543-575, August.
    13. Charles van Marrewijk, 2005. "Geographical Economics and the Role of Pollution on Location," Tinbergen Institute Discussion Papers 05-018/2, Tinbergen Institute.
    14. Hirtle, Beverly, 2009. "Credit derivatives and bank credit supply," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 125-150, April.
    15. Tetsuo Ono, 2009. "The political economy of environmental and social security policies: the role of environmental lobbying," Economics of Governance, Springer, vol. 10(3), pages 261-296, July.
    16. Mireille Chiroleu-Assouline & Mouez Fodha, 2009. "Double Dividend and Distribution of Welfare: Advanced Results and Empirical Considerations," Economie Internationale, CEPII research center, issue 120, pages 91-108.
    17. Mireille Chiroleu-Assouline & Mouez Fodha, 2011. "Verdissement de la fiscalité. À qui profite le double dividende ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 409-431.
    18. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    19. Chiroleu-Assouline, Mireille & Fodha, Mouez, 2006. "Double dividend hypothesis, golden rule and welfare distribution," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 323-335, May.
    20. repec:dau:papers:123456789/7769 is not listed on IDEAS
    21. Shintaro Nakagawa & Masayuki Sato & Rintaro Yamaguchi, 2014. "Environment, growth, and technological change in a two-country overlapping-generations model," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 16(4), pages 397-443, October.
    22. Oliveira, Livio Luiz Soares de & Júnior, Sabino da Silva Porto, 2004. "O desenvolvimento dustentável e a conexão dos recursos naturais com o crescimento econômico: uma aplicação para o Brasil e a região nordeste
      [Sustainable development and connection of natural resou
      ," MPRA Paper 45436, University Library of Munich, Germany.

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    Keywords

    Environment; growth; double dividend;

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