Accumulation with Malnutrition - The Role of Status Seeking Behavior

Sugata Marjit and Lei Yang
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Lei Yang: Hong Kong Polytechnic University, Hong Kong

No 544, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This paper investigates the optimal environmental policy (the mix of emissions tax and R&D subsidy) when two firms, producing differentiated products, compete in the output market over time. Firms compete over supply schedules, which encompasses a continuum of market structures from Bertrand to Cournot. While production generates environmentally damaging emissions, firms can undertake R&D, which has the sole purpose of reducing emissions. In addition to characterising the optimal policy, we examine how the optimal tax and subsidy and the optimal level of abatement change as competition intensifies, as the dynamic parameters change and as the investment in abatement technology changes. In this setting, increased competition no longer necessarily leads to an increase in welfare. Instead, there are two forces. Competition increases welfare through its impact on the final goods price. However, lower prices result in larger quantities and more pollution. Our contribution is to show that the impact depends on the extent of the market, and the nature of preferences and technology.

Keywords: Status; Consumption pattern; Inequality; Growth (search for similar items in EconPapers)
JEL-codes: C13 C14 C51 D01 D12 O40 (search for similar items in EconPapers)
Date: 2015-04-24
New Economics Papers: this item is included in nep-com, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:544

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