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Environmental Policy in an Endogenous Growth Model with Expanding Variety

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  • Bianco, Dominique

Abstract

In this paper, we analyze the long-term impact of an environmental policy on economic growth, pollution and welfare. A standard growth model with horizontal innovation is modified by including pollution which comes from the use of intermediate goods production. Taxation on pollution reduces profits of final good producer as well as intermediate good producers. In this setting, profit gains is explained by a realloaction of labor from intermediate goods sector to R&D sector which enhances innovation, growth and welfare while it reduces pollution.

Suggested Citation

  • Bianco, Dominique, 2017. "Environmental Policy in an Endogenous Growth Model with Expanding Variety," MPRA Paper 79300, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:79300
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    References listed on IDEAS

    as
    1. Grimaud, Andre, 1999. "Pollution Permits and Sustainable Growth in a Schumpeterian Model," Journal of Environmental Economics and Management, Elsevier, vol. 38(3), pages 249-266, November.
    2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    3. 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.
    4. Dominique Bianco & Evens Salies, 2017. "The Strong Porter Hypothesis in an Endogenous Growth Model with Satisficing Managers," Economics Bulletin, AccessEcon, vol. 37(4), pages 2641-2654.
    5. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    6. Hart, Rob, 2004. "Growth, environment and innovation--a model with production vintages and environmentally oriented research," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1078-1098, November.
    7. Elbasha, Elamin H. & Roe, Terry L., 1996. "On Endogenous Growth: The Implications of Environmental Externalities," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 240-268, September.
    8. Minoru Nakada, 2004. "Does Environmental Policy Necessarily Discourage Growth?," Journal of Economics, Springer, vol. 81(3), pages 249-275, March.
    9. 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.
    10. 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.
    11. Koesler, Simon, 2010. "Pollution externalities in a Schumpeterian growth model," ZEW Discussion Papers 10-055, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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    More about this item

    Keywords

    Porter hypothesis; endogenous growth; environmental policy;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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