The environment, the endogenous growth and the endogenous labour market
In the framework of endogenous growth of Acemoglu & Aghion in "The environment and directed technical change", the paper aims at creating endogenous labor market and analyzing its effects on the environment and on the growth in the competitive equilibrium and the optimal policy. A final output is produced by two intermediary goods, one is "dirty" and the other is "clean". The "dirty" one lowers the quality of the environment. On the contrary to the initial model, we figure out the long term growth rate changes in both the competitive equilibrium and the optimal policy. As usual in the macroeconomics models with micro foundations, we find a threshold for the discount factor p when the asymptotic growth rate in competitive equilibrium is higher than in the optimal policy. Moreover, on the contrary to the initial paper, there is a case in which an environmental disaster can be avoided in competitive equilibrium when the expected enhanced productivity is not sufficiently high. Hence, there is no growth but also no disaster. In addition to the temporary policy instrument used in the initial paper, the social planner needs another subsidy which has to be permanent for incenting the workers to become scientists in the clean sector. Hence, on the contrary to the initial paper, the government intervention has to be permanent. Therefore, our results are less optimistic than those of Acemoglu & Aghion. Our results are close to Stern / Al Gore stance. Lastly, we find that if p is in the competitive equilibrium and therefore no possible degradation of the environment.
|Date of creation:||30 Jun 2011|
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"The Environment and Directed Technical Change,"
2010.93, Fondazione Eni Enrico Mattei.
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