Endogenous Growth with a Ceiling on the Stock of Pollution

Gilbert Kollenbach

MPRA Paper from University Library of Munich, Germany

Abstract: The effects of an agreement such as the Kyoto Protocol, which implicitly imposes a ceiling on the stock of pollution, have recently been studied in Hotelling models. We add pollution and a ceiling to the endogenous growth model of \cite{tsur2005scarcity} to study the effects of the ceiling on capital accumulation and research investments. The ceiling increases the scarcity of the exhaustible resource in the short run, which boosts backstop utilization. This implies that R\&D becomes more beneficial compared with capital accumulation. How the short run development path of an economy is affected depends on its capital endowment or richness, respectively. Only economies which are neither too rich nor too poor may invest more into research. In the long run an economy with a ceiling follows basically the same long run development path as an economy without the ceiling.

Keywords: Endogenous growth; Environmental agreements; Fossil fuels; Nonrenewable resources; Research and Development (search for similar items in EconPapers)
JEL-codes: O44 Q32 Q54 Q55 Q56 (search for similar items in EconPapers)
Date: 2013-10-14
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env, nep-fdg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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