Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor

Growth and welfare effects of environmental tax reform and public spending policy

“…Ricci (2007) provides a comprehensive survey, which presents various impacts of restrictive environmental policy on growth that have been discussed in the literature. A tighter environmental policy can potentially operate through different mechanisms such as investment, education and R&D. Overall, to generate a positive growth effect, many studies incorporate environmental quality into the firm's production function as an externality by assuming that a clean environment would improve the productivity of inputs or the efficiency of the educational system (see for instance Ligthart and van der Ploeg, 1994;Bovenberg and Smulders, 1995;Grimaud, 1999;Hart, 2004;Nakada, 2004;Chen et al, 2009;Paturel, 2009;Aloi and Touremaine, 2011;among others). By developing an endogenous growth model, in which pollution affects human capital depreciation and worker's productivity, Smulders (1993, 1996), van Ewijk and van Wijnbergen (1994) and Paturel (2008) show that a tax on emissions, via its effect on learning abilities, promotes long run growth.…”

Environmental consciousness, economic growth, and macroeconomic instability

“…For example, Ligthart and van der Ploeg (1994), den Butter and Hofkes (1995) and Nielsen, Pedersen, and Sørensen (1995) assume that consumption and pollution are set to be time separable in a household's utility, so that a negative linkage between environmental consciousness and the economic growth rate is established. Running counter to the preceding viewpoint, some studies, e.g., Elbasha and Roe (1996), Huang and Cai (1994), Shieh, Lai, and Chen (2001), Itaya (2008), Chen, Shieh, Chang, and Lai (2009) and Chu and Lai (2014) also include pollution as a disutility in a multiplicative utility function of economic agents to capture the amenity effect of a clean environment. They find International Review of Economics and Finance 34 (2014) 151-160 ☆ The authors would like to thank Been-lon Chen, Hsun Chu, and the seminar participants at National Sun Yat-Sen University and National Chung Cheng University for their helpful comments and suggestions.…”

“…There are three competing and conflicting strands of the modeling strategy in the literature on the pollution growth rate. The first strand of the literature including Huang and Cai (1994), Ligthart and van der Ploeg (1994), Michel and Rotillon (1995) and Itaya (2008) specifies that pollution grows over time, while the second strand of the literature, such as Bovenberg and Smulders (1995), Elbasha and Roe (1996), Bovenberg and de Mooij (1997), Chen, Shieh, Chang, and Lai (2009) and Acemoglu, Aghion, Bursztyn, and Hemous (2012), proposes that environmental quality cannot be too low in order to support the life system. Hence the pollution growth rate is necessarily zero to avoid the excessive degeneration of environmental quality.…”

“…Surprisingly, in the environmental economics literature few studies have focused on whether the presence of pollution externalities will govern the possibility of the emergence of macroeconomic instability. In their recent papers, Itaya (2008) and Chen, Shieh, Chang, and Lai (2009) respectively develop a dynamic general equilibrium model with pollution externalities, and find that the degree of environmental consciousness, the pollution-generating function, and the extent of the environmental production externality are crucial for the emergence of macroeconomic instability. However, a common feature in Itaya (2008) and Chen, Shieh, Chang, and Lai (2009) is that they stress the supply-side factors (i.e., the endogenous laborleisure choice) for the emergence of macroeconomic instability.…”

Short and Long-Term Effects of Environmental Tax Reform

“…Endogenous growth models were used to analyse the e¤ects of green taxes on the long-term growth rate 1 . A tighter environmental policy can potentially operate through di¤erent mechanisms such as investment, education and R&D. Overall, to generate a positive growth e¤ect, many studies incorporate environmental quality into …rm's production function as an externality by considering that a clean environment would improve the productivity of inputs or the e…ciency of the education system (Ligthart and van der Ploeg,1994; Bovenberg and Smulders, 1995;Hart, 2004;Nakada, 2004, Grimaud, 1999Chen, 2009; among others). Furthermore, it was highlighted that the labour-leisure choice played a role in the transmission of the environmental tax e¤ect in a two-sector model of endogenous growth (Hettich, 1998).…”