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Environmental Policy in a Two Sector Growth Model

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  • Frank Hettich
  • Minna Selene Svane

Abstract

This paper analyses policy measures within a two sector endogenously growing economy with pollution. Pollution is either generated by production or by the use of physical capital in production, and can be reduced by public abatement activities. In this generalized Uzawa--Lucas model, the effects of fiscal policy are derived for all core variables and ratios. In addition, the optimal taxation rules are derived. If a pollution tax is not available it turns out that a first best solution may be reached by use of factor income taxation. Additionally, the effects and the possibility of environmental policy are complemented for a small open economy.

Suggested Citation

  • Frank Hettich & Minna Selene Svane, "undated". "Environmental Policy in a Two Sector Growth Model," EPRU Working Paper Series 98-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:epruwp:98-04
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    File URL: http://web.econ.ku.dk/epru/files/wp/wp9804.pdf
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    Cited by:

    1. Hettich, Frank, 2000. "The implications of international cooperation for economic growth, environmental quality and welfare," Wirtschaftswissenschaftliche Diskussionspapiere 08/2000, University of Greifswald, Faculty of Law and Economics.

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