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Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement

  • Chia-Ying Chang

    (Department of Economics, Vanderbilt University)

  • Chien-Chieh Huang

    (Department of Economics, National Dong-Hwa University, Taiwan)

  • Ping Wang

    ()

    (Department of Economics, Vanderbilt University)

This paper establishes a growth model where firms and residents in polluted areas bargain cooperatively to settle environmental concerns. While economic development affects the extent of the negotiation outcomes, the bargaining results also influence firms' incentive to undertake R&D and thus economic growth. Due to the opposing effects of production and matching technologies, an inverted-U relationship between pollution and growth is obtained. Contrasting to growth-promoting policies, policies that create barriers to firm entry or matching may reduce pollution harming growth. Due to the opposing effects of thick-matching versus effective-discounting and pollution-externality, the decentralized outcome may involve over or under-pollution.

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File URL: http://www.accessecon.com/pubs/VUECON/vu00-w10.pdf
File Function: First version, 2000
Download Restriction: no

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0010.

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Date of creation: Apr 2000
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Handle: RePEc:van:wpaper:0010
Contact details of provider: Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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