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Quantifying distortions from pollution in a R&D endogenous growth model

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  • Tiago Neves Sequeira
  • Alexandra Ferreira-Lopes

    ()

Abstract

In this note we study the distortions in an endogenous growth model developed by Grimaud and Tournemaine (2007), where new pieces of knowledge are produced in a R&D sector and used to reduce pollution emissions. Using this model along with a realistic calibration, we conclude that the economy strongly underinvests in R&D, such that the policy maker would need to implement a strong tax-subsidy scheme to correct it. We suggest that a subsidy to human capital can also decrease the gap between market and optimal allocations.

Suggested Citation

  • Tiago Neves Sequeira & Alexandra Ferreira-Lopes, 2014. "Quantifying distortions from pollution in a R&D endogenous growth model," Estudios de Economia, University of Chile, Department of Economics, vol. 41(1 Year 20), pages 149-159, June.
  • Handle: RePEc:udc:esteco:v:41:y:2014:i:1:p:149-159
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    References listed on IDEAS

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    1. Alvarez-Pelaez, Maria J. & Groth, Christian, 2005. "Too little or too much R&D?," European Economic Review, Elsevier, vol. 49(2), pages 437-456, February.
    2. Volker Grossmann & Thomas M. Steger & Timo Trimborn, 2016. "Quantifying Optimal Growth Policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(3), pages 451-485, June.
    3. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
    4. Hartog,Joop & Maassen van den Brink,Henriëtte (ed.), 2007. "Human Capital," Cambridge Books, Cambridge University Press, number 9780521873161.
    5. Grimaud, Andre & Tournemaine, Frederic, 2007. "Why can an environmental policy tax promote growth through the channel of education?," Ecological Economics, Elsevier, vol. 62(1), pages 27-36, April.
    6. del Barrio-Castro, Tomas & Lopez-Bazo, Enrique & Serrano-Domingo, Guadalupe, 2002. "New evidence on international R&D spillovers, human capital and productivity in the OECD," Economics Letters, Elsevier, vol. 77(1), pages 41-45, September.
    7. Gerhard Glomm & B. Ravikumar, 1998. "Flat-Rate Taxes, Government Spending on Education, and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 306-325, January.
    8. Ana Balcão Reis & Tiago Neves Sequeira, 2007. "Human Capital and Overinvestment in R&D," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 573-591, September.
    9. Alexandra Ferreira-Lopes & Tiago Neves Sequeira & Catarina Roseta-Palma, 2013. "On the effect of technological progress on pollution: an overlooked distortion in endogenous growth," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 394-416, April.
    10. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
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    More about this item

    Keywords

    Pollution; environmental tax; R&D; economic growth; subsidies.;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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