On Endogenous Growth: The Implications of Environmental Externalities
This paper uses an endogenous growth model to examine the interaction between trade, economic growth, and the environment. We find that whether trade enhances or retards growth depends on the relation between factor intensities of exportable, importable, and R&D and the relative abundance of the factor R&D uses more intensively. Depending on the intertemporal elasticity of substitution, the long-run rate of economic growth changes with environmental externalities. Concerns about the environment can explain a significant part of cross-country difference in growth rates. For the empirically reported range of the elasticity of intertemporal substitution, countries which care more about the environment grow faster. The effects of trade on the environment and welfare depend on the elasticities of supply for the two traded goods, the terms of trade effect on growth, and pollution intensities. The decentralized and Pareto optimal growth rates are, in general, different. The market growth rate is bigger than the optimal rate the larger the degree of monopoly power in the innovation sector and the stronger the effects of environmental externalities. The policy implications of this divergence are discussed. We also consider numerical exercises to broaden the insights from the analytical results and allow for incorporating pollution abatement
|Date of creation:||1995|
|Contact details of provider:|| Postal: (612) 625-1222|
Phone: (612) 625-1222
Fax: (612) 625-6245
Web page: http://www.apec.umn.edu/EDC.html
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:umedbu:7493. 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: (AgEcon Search)
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.