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Environmental quality, public debt and economic development

Author

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  • Mouez Fodha

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)

  • Thomas Seegmuller

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)

Abstract

This article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt. A public sector of pollution abatement is financed by a tax and/or public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental-poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state.

Suggested Citation

  • Mouez Fodha & Thomas Seegmuller, 2014. "Environmental quality, public debt and economic development," PSE - Labex "OSE-Ouvrir la Science Economique" halshs-00555625, HAL.
  • Handle: RePEc:hal:pseose:halshs-00555625
    DOI: 10.1007/s10640-013-9639-x
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00555625
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:enreec:v:68:y:2017:i:1:d:10.1007_s10640-017-0155-2 is not listed on IDEAS
    2. repec:leo:wpaper:1824 is not listed on IDEAS
    3. Mouez Fodha & Thomas Seegmuller & Hiroaki Yamagami, 2014. "Environmental Policies under Debt Constraint," AMSE Working Papers 1431, Aix-Marseille School of Economics, Marseille, France, revised Jun 2014.
    4. repec:eee:ecanpo:v:58:y:2018:i:c:p:111-120 is not listed on IDEAS
    5. Runkel, Marco & Kellner, Maximilian, 2018. "Climate Policy and Optimal Public Debt," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181639, Verein für Socialpolitik / German Economic Association.
    6. repec:eee:jmacro:v:55:y:2018:i:c:p:253-273 is not listed on IDEAS
    7. Alexander Golub & Michael Toman, 2016. "Climate Change, Industrial Transformation, and “Environmental Growth Traps”," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 249-263, February.
    8. Halkos, George & Papageorgiou, George, 2017. "Public debt, pollution and environmental taxes: Nash and Stackelberg equilibria," MPRA Paper 81982, University Library of Munich, Germany.
    9. repec:bla:rdevec:v:21:y:2017:i:3:p:786-802 is not listed on IDEAS
    10. Torben M. Andersen & Joydeep Bhattacharya & Pan Liu, 2016. "Resolving Intergenerational Conflict over the Environment under the Pareto Criterion," CESifo Working Paper Series 6053, CESifo Group Munich.

    More about this item

    Keywords

    public debt; poverty trap; economic development; Environmental policies; pollution abatement;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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