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Optimal Environmental Protection and Environmental Kuznets Curve

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  • Vladimir K. Teles
  • Ronaldo A. Arraes

Abstract

This paper explores the link between an environmental policy and economic growth employing an extension of the Neoclassical Growth Model. We include a state equation to renewable natural resources, and consider natural resources as a component of the aggregate productivity. It is assumed that the change of the environmental regulations induces costs and that economic agents also derive some utility from stock capital accumulation via-a-vis environment. Using the Hopf bifurcation theorem, it can be shown that cyclical environmental policy strategies are optimal, providing a theoretical support to the Environmental Kuznets Curve

Suggested Citation

  • Vladimir K. Teles & Ronaldo A. Arraes, 2004. "Optimal Environmental Protection and Environmental Kuznets Curve," Econometric Society 2004 Latin American Meetings 60, Econometric Society.
  • Handle: RePEc:ecm:latm04:60
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    File URL: http://repec.org/esLATM04/up.17091.1080763804.pdf
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    References listed on IDEAS

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    1. Hazilla, Michael & Kopp, Raymond J, 1990. "Social Cost of Environmental Quality Regulations: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 853-873, August.
    2. Engelbert Dockner & Gustav Feichtinger, 1991. "On the optimality of limit cycles in dynamic economic systems," Journal of Economics, Springer, vol. 53(1), pages 31-50, February.
    3. Margulis, Sergio, 1992. "Back of the envelope estimates of environmental damage costs in Mexico," Policy Research Working Paper Series 824, The World Bank.
    4. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
    5. Gene M. Grossman & Alan B. Krueger, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 353-377.
    6. Clark, Colin W., 1996. "Operational environmental policies," Environment and Development Economics, Cambridge University Press, vol. 1(01), pages 110-113, February.
    7. Feichtinger, Gustav & Novak, Andreas & Wirl, Franz, 1994. "Limit cycles in intertemporal adjustment models : Theory and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 353-380, March.
    8. 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.
    9. Grossman, Gene M. & Krueger, Alan B., 1996. "The inverted-U: what does it mean?," Environment and Development Economics, Cambridge University Press, vol. 1(01), pages 119-122, February.
    10. Wirl, Franz, 2000. "Optimal accumulation of pollution: Existence of limit cycles for the social optimum and the competitive equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 24(2), pages 297-306, February.
    11. Serafy, Salah El & Goodland, Robert, 1996. "The importance of accurately measuring growth," Environment and Development Economics, Cambridge University Press, vol. 1(01), pages 116-119, February.
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    More about this item

    Keywords

    Neoclassical Growth Model; Environmental Kuznets Curve; Hopf Bifurcation Theorem; Limit Cycles.;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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