Green Spending Reforms, Growth and Welfare with Endogenous Subjective Discounting

Eugenia Vella, Evangelos Dioikitopoulos and Sarantis Kalyvitis

No 1335, DEOS Working Papers from Athens University of Economics and Business

Abstract: This paper studies optimal fiscal policy, in the form of taxation and the allocation of tax revenues between infrastructure and environmental investment, in a general-equilibrium growth model with endogenous subjective discounting. A green spending reform, defined as a reallocation of government expenditures towards the environment, can procure a double dividend by raising growth and improving environmental conditions, although the environment does not impact the production technology. Also, endogenous Ramsey fiscal policy eliminates the possibility of an `environmental and economic poverty trap'. Contrary to the case of exogenous discounting, green spending reforms are the optimal response of the Ramsey government to a rise in the agents' environmental concerns.

Keywords: endogenous time preference; growth; environmental quality; second-best fiscal policy (search for similar items in EconPapers)
JEL-codes: D90 E21 E62 H31 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-env, nep-fdg, nep-mac and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Forthcoming in Macroeconomic Dynamics

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http://wpa.deos.aueb.gr/docs/VellaDioikitopoulosKalyvitis_wp.pdf First version (application/pdf)

Related works:
Journal Article: GREEN SPENDING REFORMS, GROWTH, AND WELFARE WITH ENDOGENOUS SUBJECTIVE DISCOUNTING (2015)
Working Paper: Green Spending Reforms, Growth and Welfare with Endogenous Subjective Discounting (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:aue:wpaper:1335

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