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Does Improved Environmental Policy Enhance Economic Growth? Endogenous Growth Theory Applied to Developing Countries

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Abstract

The environmental impacts on an economy is studied over time using endogenous growth theory. Externalities from the environment on production are central in the analysis, and we examine whether an optimal path realizes more rapid economic growth. The paper is mainly focusing on developing countries, where production is largely influenced by the environmental quality. The result of the analysis indicates that the economic growth rate does not depend on the internalization of the environmental externality, but rather on the internalization of the human capital externality. The level of economic activity does, however, generally depend on the internalization of both externalities.

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  • Knut Einar Rosendahl, 1994. "Does Improved Environmental Policy Enhance Economic Growth? Endogenous Growth Theory Applied to Developing Countries," Discussion Papers 114, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:114
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp_114.pdf
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    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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