IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01745432.html
   My bibliography  Save this paper

Are the Laffer curve and the green paradox mutually exclusive ?

Author

Listed:
  • Stefano Bosi

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • David Desmarchelier

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this paper, we study the relationship between the Laffer curve and the green paradox in the context of a Ramsey model with endogenous labor supply in which pollution increases consumer demand (through a compensation effect). We find that—in the long run—the conditions under which a Laffer curve and a green paradox emerge are mutually exclusive. Indeed, the Laffer curve exists under a weak compensation effect, while the green paradox requires a strong effect. Also, we find that, in the short run, limit cycles may arise in the presence of a Laffer curve, while they never occur under a green paradox.

Suggested Citation

  • Stefano Bosi & David Desmarchelier, 2017. "Are the Laffer curve and the green paradox mutually exclusive ?," Post-Print hal-01745432, HAL.
    • Handle: RePEc:hal:journl:hal-01745432
    DOI: 10.1111/jpet.12242
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. van der Meijden, Gerard & van der Ploeg, Frederick & Withagen, Cees, 2015. "International capital markets, oil producers and the Green Paradox," European Economic Review, Elsevier, vol. 76(C), pages 275-297.
    2. Stefano Bosi & David Desmarchelier, 2018. "Limit Cycles Under a Negative Effect of Pollution on Consumption Demand: The Role of an Environmental Kuznets Curve," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 343-363, February.
    3. Fernández, Esther & Pérez, Rafaela & Ruiz, Jesús, 2012. "The environmental Kuznets curve and equilibrium indeterminacy," Journal of Economic Dynamics and Control, Elsevier, vol. 36(11), pages 1700-1717.
    4. Thomas Eichner & Rüdiger Pethig, 2011. "Carbon Leakage, The Green Paradox, And Perfect Future Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 767-805, August.
    5. Reyer Gerlagh, 2011. "Too Much Oil," CESifo Economic Studies, CESifo Group, vol. 57(1), pages 79-102, March.
    6. Quentin Grafton, R. & Kompas, Tom & Van Long, Ngo, 2012. "Substitution between biofuels and fossil fuels: Is there a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 328-341.
    7. Schmitt-Grohe, Stephanie & Uribe, Martin, 1997. "Balanced-Budget Rules, Distortionary Taxes, and Aggregate Instability," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 976-1000, October.
    8. Itaya, Jun-ichi, 2008. "Can environmental taxation stimulate growth? The role of indeterminacy in endogenous growth models with environmental externalities," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1156-1180, April.
    9. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
    10. Stefano Bosi & David Desmarchelier & Lionel Ragot, 2015. "Pollution effects on labor supply and growth," International Journal of Economic Theory, The International Society for Economic Theory, vol. 11(4), pages 371-388, December.
    11. van der Ploeg, Frederick & Withagen, Cees, 2012. "Is there really a green paradox?," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 342-363.
    12. Ireland, Peter N., 1994. "Supply-side economics and endogenous growth," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 559-571, June.
    13. Nourry, Carine & Seegmuller, Thomas & Venditti, Alain, 2013. "Aggregate instability under balanced-budget consumption taxes: A re-examination," Journal of Economic Theory, Elsevier, vol. 148(5), pages 1977-2006.
    14. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bosi, Stefano & Desmarchelier, David, 2018. "Natural cycles and pollution," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 10-20.
    2. Amir, Rabah & Gama, Adriana & Maret, Isabelle, 2019. "Environmental quality and monopoly pricing," Resource and Energy Economics, Elsevier, vol. 58(C).
    3. Lin, Boqiang & Jia, Zhijie, 2019. "Tax rate, government revenue and economic performance: A perspective of Laffer curve," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    4. Bosi, Stefano & Desmarchelier, David, 2019. "Local bifurcations of three and four-dimensional systems: A tractable characterization with economic applications," Mathematical Social Sciences, Elsevier, vol. 97(C), pages 38-50.
    5. Guillaume MOREL, 2020. "A note on pollution and infectious disease," Working Papers of BETA 2020-38, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    6. Xiaoke Zhao & Xuhui Ding & Liang Li, 2021. "Research on Environmental Regulation, Technological Innovation and Green Transformation of Manufacturing Industry in the Yangtze River Economic Belt," Sustainability, MDPI, vol. 13(18), pages 1-15, September.
    7. Guillaume Morel, 2020. "A note on pollution and infectious disease," Economics Bulletin, AccessEcon, vol. 40(4), pages 2723-2733.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stefano Bosi & David Desmarchelier, 2016. "Are the Laffer curve and the Green Paradox mutually exclusive?," Working Papers hal-04141602, HAL.
    2. Johannes Pfeiffer, 2017. "Fossil Resources and Climate Change – The Green Paradox and Resource Market Power Revisited in General Equilibrium," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    3. Nachtigall, Daniel & Rübbelke, Dirk, 2016. "The green paradox and learning-by-doing in the renewable energy sector," Resource and Energy Economics, Elsevier, vol. 43(C), pages 74-92.
    4. Fischer, Carolyn & Salant, Stephen W., 2017. "Balancing the carbon budget for oil: The distributive effects of alternative policies," European Economic Review, Elsevier, vol. 99(C), pages 191-215.
    5. Okullo, Samuel J. & Reynès, Frédéric & Hofkes, Marjan W., 2021. "(Bio-)Fuel mandating and the green paradox," Energy Economics, Elsevier, vol. 95(C).
    6. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    7. Stefano Bosi & David Desmarchelier, 2021. "Pollution effects on disease transmission and economic stability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(2), pages 169-189, June.
    8. Marz, Waldemar & Pfeiffer, Johannes, 2020. "Petrodollar recycling, oil monopoly, and carbon taxes," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    9. Thomas Michielsen, 2013. "Brown Backstops Versus the Green Paradox," OxCarre Working Papers 108, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    10. Kollenbach, Gilbert & Schopf, Mark, 2022. "Unilaterally optimal climate policy and the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    11. Di Maria, Corrado & Lange, Ian & van der Werf, Edwin, 2014. "Should we be worried about the green paradox? Announcement effects of the Acid Rain Program," European Economic Review, Elsevier, vol. 69(C), pages 143-162.
    12. Michielsen, Thomas O., 2014. "Brown backstops versus the green paradox," Journal of Environmental Economics and Management, Elsevier, vol. 68(1), pages 87-110.
    13. Grafton, R. Quentin & Kompas, Tom & Long, Ngo Van & To, Hang, 2014. "US biofuels subsidies and CO2 emissions: An empirical test for a weak and a strong green paradox," Energy Policy, Elsevier, vol. 68(C), pages 550-555.
    14. Gilbert Kollenbach, 2019. "Unilateral climate policy and the green paradox: Extraction costs matter," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(3), pages 1036-1083, August.
    15. Gerard Meijden & Frederick Ploeg & Cees Withagen, 2017. "Frontiers of Climate Change Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 1-14, September.
    16. Mark Schopf, 2013. "Preserving Eastern or Offshore Oil for Preventing Green Paradoxes?," Working Papers CIE 63, Paderborn University, CIE Center for International Economics.
    17. Julien Daubanes & Pierre Lasserre, 2019. "The supply of non-renewable resources," Canadian Journal of Economics, Canadian Economics Association, vol. 52(3), pages 1084-1111, August.
    18. Malik Curuk & Suphi Sen, 2023. "Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitutes," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 10(4), pages 1091-1120.
    19. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    20. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.

    More about this item

    Keywords

    Ramsey model; Pollution; Laffer Curve; Green Paradox; Hopf bifurcation;
    All these keywords.

    JEL classification:

    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01745432. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.