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Environmental policies in a stagnant economy

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  • Masako Ikefuji
  • Yoshiyasu Ono

Abstract

Using a dynamic optimization model of a monetary economy where persistent unemployment can prevail, we examine the effects of environmental policies on consumption and pollution emissions in a full-employment and a stagnant economy. If full employment prevails, environmental policies such as environmental tax and public pollution abatement naturally crowd out commodity production and hence decrease consumption. However, if unemployment appears, they stimulate consumption and production by increasing total employment and mitigating deflation, thus yielding additional pollution emissions. Net pollution emissions may eventually increase. The optimal environmental policy mix is also examined.

Suggested Citation

  • Masako Ikefuji & Yoshiyasu Ono, 2020. "Environmental policies in a stagnant economy," ISER Discussion Paper 1110, Institute of Social and Economic Research, Osaka University.
    • Handle: RePEc:dpr:wpaper:1110
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    Cited by:

    1. Masako Ikefuji & Yoshiyasu Ono, 2023. "Environmental Policies and Stagnation in a Two-Country Economy," CESifo Working Paper Series 10825, CESifo.
    2. Li, Mengjie & Du, Weijian, 2022. "Opening the black box of capacity governance: Environmental regulation and capacity utilization of microcosmic firms in China," Economic Modelling, Elsevier, vol. 108(C).

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    More about this item

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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