Channels of transmission of environmental policy to economic growth: A survey of the theory (original) (raw)
Related papers
An empirical analysis of the interactions between environmental regulations and economic growth
The purpose of this research is to examine the relationship between environmental regulation and economic growth. A four-equation regional growth model is used to analyze the simultaneous relationships among changes in population, employment, per capita income, and environmental regulations for the 410 counties in Appalachia. Our results reveal that initial conditions for environmental regulation are negatively related to regional growth factors of change in population, per capita income, and total employment. From this, we infer that the diversion of resources from production and investment activities to pollution abatement is inadvertently transmitted to other sectors of the economy-thereby resulting in a slowdown of regional growth. We also find robust evidence that show that changes in environmental regulations positively influence changes in population, total employment, and per capita income. Thus, we parsimoniously conclude that in the long-run, environmental regulations are not detrimental to economic growth.
Environmental policy and sustainable economic growth
De Economist, 1995
This paper investigates the consequences of environmental policy for welfare, consumption and production growth in a situation in which environmental quality is initially too low. The natural environment is incorporated in endogenous growth theory in a way that is consistent with some simple notions from the laws of thermodynamics. Environmental policy affects growth, both in the long run and in the short run, by affecting the productivity of investment and the savings behavior of consumers. * I am indebted to L. Bovenberg, S. Cnossen, and Th. van de Klundert for useful comments.
Endogenous growth effects of environmental policies
Panoeconomicus, 2015
To analyse the impact of the environmental policies, we start by reviewing the literature on the environment, technological knowledge and economic growth. Then, we build a general equilibrium endogenous growth model where final goods are produced either in the skilled-labour intensive Clean sector or in the unskilled-labour intensive Unclean sector. By solving numerically transitional dynamics towards the unique and stable steady state, we observe that environmental policies encourage scale-invariant technological knowledge bias. This, in turn, promotes environmental quality, the skill premium and economic growth. Moreover, the impact of population growth on the steady-state growth rate is higher under strong households? environmental conscientiousness with future generations.
Growth, Innovation and Environmental Policy: Clean vs. Dirty Technical Change by
2000
This paper focuses on a two sector endogenous growth model with environmental quality, with two goods and factors, one clean and one dirty. Endogenous technological change creates either clean or dirty innovations, depending on relative profitability. The reduction of emissions intensity of aggregate output is achieved by changing the dirty-bias of technology in the economy. The decentralized equilibrium growth rate
Environmental protection and economic growth
2009
This paper explores the link between environmental policy and economic growth by employing an extension of the AK Growth Model. We include a state equation for renewable natural resources. We assume that the change in environmental regulations induces costs and that economic agents also derive some utility from capital stock accumulation vis-à-vis the environment. Using the Hopf bifurcation theorem, we show that cyclical environmental policy strategies are optimal, providing theoretical support for the Environmental Kuznets Curve.
Effects on growth of environmental policy in a small open economy
2011
This paper examines the effect of environmental policy on economic growth in a small open economy in a neoclassical framework with pollution as an input. We show that environmental policy imposes a drag on long run growth in both the open and closed economy cases. The effect of environmental policy on growth is stronger in the open economy case relative to the closed economy model if the country has strong aversion to pollution and thus serves as a net exporter of capital in the international capital market. On the other hand, if the agents in the economy have low aversion to pollution and thus import capital, the effect of environmental care on growth is stronger in the closed economy relative to the open economy. Thus, from our set-up, environmental policy is harmful to growth but environmental sustainability need not be incompatible with continued economic growth.
Why can an environmental policy tax promote growth through the channel of education?
Ecological Economics, 2007
This paper examines the implications of an environmental policy for growth performances. We develop a model where growth is driven by human capital accumulation. Firms invest in research to develop new technologies to reduce their pollution emissions and education is treated as product which not only enhances the productivity of individuals but also enters in their preferences. We find that a tighter environmental policy can promote growth. The reason is that a higher tax on pollution drives the prices of goods whose production is polluting up. This, in turn, enhances the willingness of individuals to acquire education.
Economic development and environmental pollution: traps and growth
Structural Change and Economic Dynamics, 1997
Increasing returns as a result of knowledge spillovers in the output production and pollution abatement sectors of an economy are simultaneously introduced into an optimal growth model. It is shown that the stock of abatement knowledge exhibits threshold characteristics. That is, countries could be trapped in low growth regions because of lack of knowledge of pollution abatement. A combination of industrial and environmental policy is examined that could help an economy avoid the 'environmental trap'.
Environmental Policies, Pollution and Growth in a Model with Vertical Innovations
The paper introduces environmental considerations and public policies in a Schumpeterian model with vertical innovations and "creative destruction". It is shown that environmental policies affect growth through several partial and general equilibrium mechanisms. In particular, they affect profits in the intermediate good sector. Thus through this channel they influence the value of firms, and finally research and growth. These mechanisms lead to a trade-off between environment and growth.
Journal of Public Economics, 1995
This paper explores the link between environmental quality and economic growth in an endogenous growth model that incorporates pollution-augmenting technological change. It examines the conditions under which sustainable growth is both feasible and optimal. We explore also how the government should intervene to ensure the optimal levels of natural and knowledge capital, which share a publicgoods character. We establish the conditions for a more ambitious environmental policy to raise long-run growth.