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We consider a Lucas (1988) type model of endogenous growth in which the environmental quality positively affects the rate of human capital accumulation and the environmental quality itself is positively affected by human capital accumulation and is negatively affected by physical capital accumulation. We analyse the effects of taxation on the steady state equilibrium growth rate in this model. We also analyse the transitional dynamic properties of this model. JEL Classification: C62, H23, J24, O15, O41

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