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Phasing out a polluting input in a growth model with directed technological change
Mälardalen University, School of Business, Society and Engineering, Industrial Economics and Organisation.ORCID iD: 0000-0001-7072-3640
2018 (English)In: Economic Modelling, ISSN 0264-9993, E-ISSN 1873-6122, Vol. 68, p. 461-474Article in journal (Refereed) Published
Abstract [en]

This paper explores the potential conflict between economic growth and the environment, and the optimal long-run environmental policy. It formulates a growth model with directed technological change and focuses on the case with low elasticity of substitution between clean and dirty inputs in production. New technology is substituted for the polluting input, which results in a gradual decline in pollution along the optimal long-run growth path. In contrast to some recent work, the era of pollution and environmental policy is here not just a transitory phase in economic development. This result means that the government's continuous efforts to reconcile economic growth and the environment will always be needed. The socially optimal policy includes a perpetual subsidy to ‘green’ research. The tax rate of pollution is monotonously increasing, while the pollution tax payments constitute a constant share of income. These policies result in a quite modest growth drag.

Place, publisher, year, edition, pages
Elsevier B.V. , 2018. Vol. 68, p. 461-474
Keyword [en]
Directed technological change, Energy substitution, Growth drag, Pollution
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:mdh:diva-38174DOI: 10.1016/j.econmod.2017.08.022ISI: 000423247800037Scopus ID: 2-s2.0-85032336604OAI: oai:DiVA.org:mdh-38174DiVA: diva2:1176909
Available from: 2018-01-23 Created: 2018-01-23 Last updated: 2018-02-08Bibliographically approved

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Eriksson, Clas

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Output format
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