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Endogenous Growth, Green Innovation and GDP Deceleration in a World with Polluting Production Inputs

  • Burghaus, Kerstin
  • Funk, Peter

We study economic growth and pollution control in a model with endogenous rate and direction of technical change. Economic growth (growth of real GDP) results from growth in the quantity and productivity of polluting intermediates. Pollution can be controlled by reducing the pollution intensity of a given quantity through costly research (green innovation) and by reducing the share of polluting intermediate quantity in GDP. Without clean substitutes, saving on polluting inputs implies that the rate of GDP growth remains below productivity growth (deceleration). While neither green innovation nor deceleration is chosen under laissez-faire, both contribute to long-run optimal pollution control for reasonable parameter values. In our baseline-model, there are no exhaustible resources. In an extension, we analyze the e ects of resource-scarcity on the environment, long-run growth and the direction of technical change.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 80022.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:80022
Contact details of provider: Web page: http://www.socialpolitik.org/
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  9. GRIMAUD André & LAFFORGUE Gilles & MAGNE Bertrand, 2008. "Climate change mitigation options and directed technical change: A decentralized equilibrium analysis," LERNA Working Papers 08.10.254, LERNA, University of Toulouse.
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  12. Smulders, J.A. & de Nooij, M., 2003. "The impact of energy conservation on technology and economic growth," Other publications TiSEM c4db0986-2132-4216-aa53-0, Tilburg University, School of Economics and Management.
  13. Raymond Gradus & Sjak Smulders, 1993. "The trade-off between environmental care and long-term growth—Pollution in three prototype growth models," Journal of Economics, Springer, vol. 58(1), pages 25-51, February.
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  16. 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.
  17. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
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