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Natural Disasters in a Two-Sector Model of Endogenous Growth

Author

Listed:
  • Ryo Horii

    () (Department of Economics, Yale University)

  • Masako Ikefuji

    () (Institute for Social and Economic Research, Osaka University)

Abstract

This paper studies sustainability of economic growth considering the risk of natural disasters caused by pollution in an endogenous growth model with physical and human capital accumulation. It is shown that economic growth is sustainable only if the tax rate on the polluting input is increased over time and that the long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax. The social welfare is maximized under a positive steady-state growth in which faster accumulation of human capital compensates the productivity loss due to declining use of the polluting input.

Suggested Citation

  • Ryo Horii & Masako Ikefuji, 2010. "Natural Disasters in a Two-Sector Model of Endogenous Growth," Working Papers 992, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:992
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    References listed on IDEAS

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    Cited by:

    1. Hiroaki Sakamoto & Masako Ikefuji & Jan R. Magnus, 2017. "Adaptation for mitigation," Discussion papers e-16-014, Graduate School of Economics , Kyoto University.
    2. Masako Ikefuji & Jan Magnus & Hiroaki Sakamoto, 2014. "Adaptation for Mitigation," Tinbergen Institute Discussion Papers 14-126/III, Tinbergen Institute.
    3. Prudence Dato, 2015. "Energy transition under irreversibility: a two-sector approach," Working Papers 2015.05, FAERE - French Association of Environmental and Resource Economists.
    4. Ryo Horii & Masako Ikefuji, 2014. "Environment and Growth," DSSR Discussion Papers 21, Graduate School of Economics and Management, Tohoku University.
    5. Erickson, Gary M., 2014. "Advertising, economic development, and global warming," Economic Modelling, Elsevier, vol. 41(C), pages 119-123.
    6. Takumi Motoyama, 2016. "From Physical to Human Capital Accumulation with Pollution," Discussion Papers in Economics and Business 16-03, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    7. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, pages 92-106.
    8. Jasmin Katrin Gröschl, 2013. "Gravity Model Applications and Macroeconomic Perspectives," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 48, April.
    9. Motoyama, Takumi, 2017. "Optimal disaster-preventive expenditure in a dynamic and stochastic model," Journal of Macroeconomics, Elsevier, pages 28-47.
    10. Lucas Bretschger & Alexandra Vinogradova, 2014. "Going beyond tradition:Growth and Mitigation Policies with Uncertain Climate Damage," CER-ETH Economics working paper series 14/202, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    11. Hosoya, Kei, 2016. "Recovery from natural disaster: A numerical investigation based on the convergence approach," Economic Modelling, Elsevier, vol. 55(C), pages 410-420.
    12. Lucas Bretschger & Alexandra Vinogradova, 2014. "Growth and Mitigation Policies with Uncertain Climate Damage," OxCarre Working Papers 145, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    13. Lucas Bretschger & Alexandra Vinogradova, 2014. "Growth and Mitigation Policies with Uncertain Climate Damage," CEEES Paper Series CE3S-02/14, European University at St. Petersburg, Department of Economics.
    14. repec:kap:enreec:v:68:y:2017:i:3:d:10.1007_s10640-016-0053-z is not listed on IDEAS
    15. Bretschger, Lucas & Suphaphiphat, Nujin, 2014. "Effective climate policies in a dynamic North–South model," European Economic Review, Elsevier, vol. 69(C), pages 59-77.
    16. Bretschger, Lucas, 2015. "Greening Economy, Graying Society," MPRA Paper 66218, University Library of Munich, Germany.
    17. Takumi Motoyama, 2015. "Optimal disaster-preventive expenditure in a dynamic and stochastic model," Discussion Papers in Economics and Business 15-03-Rev., Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Oct 2016.
    18. Renaud Bourlès & Anastasia Cozarenco & Dominique Henriet & Xavier Joutard, 2015. "Business Training Allocation and Credit Scoring: Theory and Evidence from Microcredit in France," AMSE Working Papers 1526, Aix-Marseille School of Economics, Marseille, France.
    19. Javier Herrera & Mireille Razafindrakoto & François Roubaud, 2013. "Les sciences sociales au service du débat démocratique au Sud:enjeux, supports, retombées. Résultats d'expériences dans le champ de l'économie et de la statistique," Working Papers DT/2013/02, DIAL (Développement, Institutions et Mondialisation).
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    21. Wei-Bin Zhang, 2015. "Oscillations in a Growth Model with Capital, Technology and Environment with Exogenous Shocks," Academicus International Scientific Journal, Entrepreneurship Training Center Albania, issue 12, pages 73-93, July.
    22. AKAO Ken-Ichi & SAKAMOTO Hiroaki, 2013. "A Theory of Disasters and Long-run Growth," Discussion papers 13061, Research Institute of Economy, Trade and Industry (RIETI).
    23. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, pages 92-106.

    More about this item

    Keywords

    human capital; global warming; environmental tax; endogenous depreciation; nonbalanced growth path;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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