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Stochastic Pollution and Environmental Care in an Endogenous Growth Model

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  • Susanne Soretz

Abstract

This paper analyzes the impact of pollution and abatement policy within a stochastic endogenous growth model. The agents have environmental preferences, but they neglect their individual contribution to aggregate abatement. Therefore, environmental care is done by the government and financed via income taxation and government bonds. Equilibrium growth depends on environmental preferences, perception of aggregate capital and risk aversion. Environmental care as well as fiscal policy are analyzed. Due to environmental preferences and partial anticipation of the dependence between aggregate and individual capital, government debt influences equilibrium growth. Hence, income taxation has an additional indirect impact on accumulation through the simultaneous adjustment of portfolio choice. From numerical simulation it can be concluded that the optimal income tax rate decreases with the perception of the influence of individual on aggregate capital. In contrast, the impact of environmental preferences and uncertainty on optimal financing is ambiguous.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Susanne Soretz, 2002. "Stochastic Pollution and Environmental Care in an Endogenous Growth Model," Computing in Economics and Finance 2002 74, Society for Computational Economics.
  • Handle: RePEc:sce:scecf2:74
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Susanne Soretz, 2007. "Efficient Dynamic Pollution Taxation in an Uncertain Environment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(1), pages 57-84, January.
    2. Azomahou, Theophile & Mishra, Tapas, 2009. "Stochastic environmental effects, demographic variation, and economic growth," MERIT Working Papers 016, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    3. Théophile T. Azomahou & Tapas Mishra & Mamata Parhi, 2015. "Economic Growth under Stochastic Population and Pollution Shocks," Manchester School, University of Manchester, vol. 83(3), pages 314-345, June.
    4. Wang, Min & Zhao, Jinhua & Bhattacharya, Joydeep, 2015. "Optimal health and environmental policies in a pollution-growth nexus," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 160-179.
    5. repec:spr:annopr:v:267:y:2018:i:1:d:10.1007_s10479-016-2357-3 is not listed on IDEAS
    6. La Torre, Davide & Marsiglio, Simone & Privileggi, Fabio, 2018. "Fractal Attractors in Economic Growth Models with Random Pollution Externalities," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201801, University of Turin.

    More about this item

    Keywords

    Pollution; Endogenous Growth; Uncertainty; Taxation;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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