IDEAS home Printed from https://ideas.repec.org/p/aim/wpaimx/1925.html
   My bibliography  Save this paper

Pollution in a globalized world: Are debt transfers among countries a solution?

Author

Abstract

This article analyzes the impacts of debt relief on production and pollution. We develop at wo-country overlapping generations model with environmental externalities, public debts and perfect mobility of assets. Pollutant emissions arise from production, but agents may invest in pollution mitigation. Could debt relief be an efficient tool to encourage less developed countries to engage in the fight against climate change? We consider a decrease of the debt of the poor country balanced by an increase of the richer country’s debt. We show that debt relief makes it possible to engage poor countries in the process of pollution abatement. Capital, environmental quality and welfare can increase in both countries. This result relies on the environmental sensitivity and the discount factor in the poor country relative to the rich one: the greater they are the more beneficial the debt relief is.

Suggested Citation

  • Marion Davin & Mouez Fodha & Thomas Seegmuller, 2019. "Pollution in a globalized world: Are debt transfers among countries a solution?," AMSE Working Papers 1925, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:1925
    as

    Download full text from publisher

    File URL: https://www.amse-aixmarseille.fr/sites/default/files/working_papers/wp_2019_-_nr_25.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2018. "Environmental Tax Reform under Debt Constraint," Annals of Economics and Statistics, GENES, issue 129, pages 33-52.
    2. Hiroaki Sakamoto & Masako Ikefuji & Jan R. Magnus, 2020. "Adaptation for Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(3), pages 457-484, March.
    3. repec:hal:pseose:halshs-00555625 is not listed on IDEAS
    4. Mouez Fodha & Thomas Seegmuller, 2014. "Environmental Quality, Public Debt and Economic Development," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(4), pages 487-504, April.
    5. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
    6. Fodha, Mouez & Seegmuller, Thomas, 2012. "A Note On Environmental Policy And Public Debt Stabilization," Macroeconomic Dynamics, Cambridge University Press, vol. 16(3), pages 477-492, June.
    7. repec:dau:papers:123456789/15028 is not listed on IDEAS
    8. Cassimon, Danny & Van Campenhout, Bjorn & Ferry, Marin & Raffinot, Marc, 2015. "Africa: Out of debt, into fiscal space? Dynamic fiscal impact of the debt relief initiatives on African Heavily Indebted Poor Countries (HIPCs)," International Economics, Elsevier, vol. 144(C), pages 29-52.
    9. Axel Dreher & Sarah Langlotz, 2020. "Aid and growth: New evidence using an excludable instrument," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 1162-1198, August.
    10. Wang, Mei & Rieger, Marc Oliver & Hens, Thorsten, 2016. "How time preferences differ: Evidence from 53 countries," Journal of Economic Psychology, Elsevier, vol. 52(C), pages 115-135.
    11. David Dollar & Craig Burnside, 2000. "Aid, Policies, and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 847-868, September.
    12. Mouez Fodha & Thomas Seegmuller, 2014. "Environmental Quality, Public Debt and Economic Development," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(4), pages 487-504, April.
    13. Birgit Bednar-Friedl & Karl Farmer & Andreas Rainer, 2010. "Effects of Unilateral Climate Policy on Terms of Trade, Capital Accumulation, and Welfare in a World Economy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(4), pages 495-520, December.
    14. Johan Eyckmans & Sam Fankhauser & Snorre Kverndokk, 2016. "Development Aid and Climate Finance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 429-450, February.
    15. Bovenberg, A. Lans & Heijdra, Ben J., 1998. "Environmental tax policy and intergenerational distribution," Journal of Public Economics, Elsevier, vol. 67(1), pages 1-24, January.
    16. Cassimon, Danny & Prowse, Martin & Essers, Dennis, 2009. "The pitfalls and potential of debt-for-nature swaps: a US-Indonesian case study," IOB Working Papers 2009.07, Universiteit Antwerpen, Institute of Development Policy (IOB).
    17. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    18. Danny Cassimon & Martin Prowse & Dennis Essers, 2014. "Financing the Clean Development Mechanism through Debt-for-Efficiency Swaps? Case Study Evidence from a Uruguayan Wind Farm Project," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(1), pages 142-159, January.
    19. Ilaski Barañano & Marta San Martín, 2015. "The Impact of Foreign Aid Linked to Infrastructure and Pollution Abatement," Review of International Economics, Wiley Blackwell, vol. 23(4), pages 667-686, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marion Davin & Mouez Fodha & Thomas Seegmuller, 2023. "Pollution in a globalized world: Are debt transfers among countries a solution?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 21-38, March.
    2. Marion Davin & Mouez Fodha & Thomas Seegmuller, 2019. "Pollution in a globalized world: Are debt transfers among countries a solution?," Working Papers halshs-02303265, HAL.
    3. Mireille Chiroleu-Assouline & Mouez Fodha, 2023. "Debt, tax and environmental policy [Dette, taxe et politique environnementale]," Post-Print halshs-04181981, HAL.
    4. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," Working Papers halshs-01023798, HAL.
    5. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2018. "Environmental Tax Reform under Debt Constraint," Annals of Economics and Statistics, GENES, issue 129, pages 33-52.
    6. Nicolas Clootens & Francesco Magris, 2024. "Nonrenewable resource use sustainability and public debt," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.
    7. Mouez Fodha & Thomas Seegmuller, 2014. "Environmental Quality, Public Debt and Economic Development," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(4), pages 487-504, April.
    8. repec:aim:wpaimx:2032 is not listed on IDEAS
    9. Nguyen Thang Dao & Kerstin Burghaus & Ottmar Edenhofer, 2017. "Self-Enforcing Intergenerational Social Contracts for Pareto Improving Pollution Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 129-173, September.
    10. Nicolas Clootens & Francesco Magris, 2021. "The Environmental Unsustainability of Public Debt: Non-Renewable Resources, Public Finances Stabilization and Growth," Working Papers 2021.06, FAERE - French Association of Environmental and Resource Economists.
    11. repec:hal:wpaper:halshs-00555625 is not listed on IDEAS
    12. Andersen, Torben M. & Bhattacharya, Joydeep & Liu, Pan, 2020. "Resolving intergenerational conflict over the environment under the Pareto criterion," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    13. repec:hal:pseose:halshs-00555625 is not listed on IDEAS
    14. Andersen, Torben M. & Bhattacharya, Joydeep & Liu, Pan, 2018. "A way to resolve intergenerational conflict over the environment under the Pareto criterion using green bonds," ISU General Staff Papers 201808240700001070, Iowa State University, Department of Economics.
    15. Nicolas CLOOTENS, 2014. "Public Debt, Life Expectancy and the Environment," LEO Working Papers / DR LEO 1824, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    16. Richard Bluhm & Martin Gassebner & Sarah Langlotz & Paul Schaudt, 2021. "Fueling conflict? (De)escalation and bilateral aid," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(2), pages 244-261, March.
    17. Anna Dugan & Alexia Prskawetz & Natacha Raffin, 2024. "The environment, life expectancy, and growth in overlapping generations models: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 38(5), pages 1593-1621, December.
    18. Dao, Nguyen Thang & Edenhofer, Ottmar, 2018. "On the fiscal strategies of escaping poverty-environment traps towards sustainable growth," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 253-273.
    19. Heckelman, Jac C & Wilson, Bonnie, 2023. "Aid, Reform, and Interest Groups," MPRA Paper 124542, University Library of Munich, Germany.
    20. Hervé Nenghem Takam & Roger Tsafack Nanfosso, 2024. "Importance of official development assistance in improving the economic cycles of Economic and Monetary Community of Central Africa countries," SN Business & Economics, Springer, vol. 4(7), pages 1-22, July.
    21. Boly, Mohamed & Combes, Jean-Louis & Menuet, Maxime & Minea, Alexandru & Motel, Pascale Combes & Villieu, Patrick, 2022. "Can public debt mitigate environmental debt? Theory and empirical evidence," Energy Economics, Elsevier, vol. 111(C).
    22. Huanhuan Zheng & Chen Li, 2022. "Can money buy friendship?—Evidence from the US and China’s competition for influence through foreign aid," The World Economy, Wiley Blackwell, vol. 45(10), pages 3224-3245, October.
    23. George, Halkos E. & George, Papageorgiou J. & Emmanuel, Halkos G. & John, Papageorgiou G., 2019. "Environmental regulation and economic cycles," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 172-177.

    More about this item

    Keywords

    pollution; abatement; overlapping generations; public debt; capital market integration;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1925. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gregory Cornu (email available below). General contact details of provider: https://edirc.repec.org/data/amseafr.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.