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The Growth-Environment Trade-off: Horizontal vs Vertical Innovations

Author

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  • Andre'' Grimaud

    (GREMAQ and IDEI, Universite' de Toulouse 1)

  • Francesco Ricci

    (GREMAQ, Universite' de Toulouse 1)

Abstract

This paper explores the trade-off between economic growth and environmental quality along two paradigms of endogenous growth theory: variety expansion (HIP) and quality improvements (VIP). We compare the policies that match the decentralised economies' paths with the optimal "strong sustainable" growth path, characterised by growth in consumption and improvements in environmental quality. Three policy tools are employed: subsidies to monopolists and R&D, and taxes on emissions. The latter is increasing at the optimum, to keep the weight of tax revenues over output constant. All policy tools equal, the growth rate is higher in the VIP than in the HIP. The optimal subsidy to R&D is therefore greater and the cumulative loss in output smaller under HIP than the VIP.

Suggested Citation

  • Andre'' Grimaud & Francesco Ricci, 1999. "The Growth-Environment Trade-off: Horizontal vs Vertical Innovations," Working Papers 1999.34, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:1999.34
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Pascal da Costa, 2014. "Semi-Endogenous Growth and Pollution: No Double Dividend in the Long Term," Working Papers hal-00994904, HAL.
    2. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    3. Dagmar Nelissen & Till Requate, 2007. "Pollution-reducing and resource-saving technological progress," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 6(1), pages 5-44.
    4. Andri Brenner, 2021. "The Social Power of Spillover Effects: Educating Against Environmental Externalities," CEPA Discussion Papers 35, Center for Economic Policy Analysis.
    5. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    6. Dieudonne Alemagi & Pius M. Oben & Jürgen Ertel, 2006. "Implementing environmental management systems in industries along the Atlantic coast of Cameroon: drivers, benefits and barriers," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 13(4), pages 221-232, September.
    7. Carraro, Carlo & De Cian, Enrica & Nicita, Lea & Massetti, Emanuele & Verdolini, Elena, 2010. "Environmental Policy and Technical Change: A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 4(2), pages 163-219, October.
    8. Gerusa Giménez Leal & Martí Casadesús Fa & Jaume Valls Pasola, 2003. "Using environmental management systems to increase firms' competitiveness," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 10(2), pages 101-110, June.

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    More about this item

    Keywords

    Pollution; Endogenous Growth; Sustainable Development;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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