Pollution externalities in a Schumpeterian growth model
This paper extends a standard Schumpeterian growth model to include an environmental dimension. Thereby, it explicitly links the pollution intensity of economic activity to technological progress. In a second step, it investigates the effect of pollution on economic growth under the assumption that pollution intensities are related to technological progress. Several conclusions emerge from the model. In equilibrium, the economy follows a balanced growth path. The effect of pollution on the economic growth rate vitally depends on the households' degree of pollution aversion and on the link between pollution intensity and the technology level. The decentralized solution does not meet the social optimum, though the social optimum can be implemented through the introduction of subsidies and pollution permits. Expectedly, the introduction of a pollution threshold stalls growth if pollution is not decoupled from economic growth and the possibility of pollution abatement allows the economy to grow at a higher rate.
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THEMA Working Papers
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Other publications TiSEM
1ed65010-f4ac-4a1f-84b6-4, Tilburg University, School of Economics and Management.
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"The trade-off between environmental care and long-term growth : Pollution in three proto-type growth models,"
Other publications TiSEM
f3ec6de7-f996-4ac0-b872-0, Tilburg University, School of Economics and Management.
- 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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