Environmental policy in a two sector endogenous growth model

Frank Hettich and Minna Selene Svane

No 290, Discussion Papers, Series I from University of Konstanz, Department of Economics

Abstract: This paper analyses policy measures within a two sector endogenously growing economy with pollution. Pollution is either generated by production or by the use of physical capital in production, and can be reduced by public abatement activities. In this generalized Uzawa-Lucas model, the effects of fiscal policy are derived for all core variables and ratios. In addition, the optimal taxation rules are derived. If a pollution tax is not available it turns out that a first best solution may be reached by use of factor income taxation. Additionally, the effects and the possibility of environmental policy are complemented for a small open economy.

Keywords: endogenous growth; environmental externality; optimal taxation; international capital mobility (search for similar items in EconPapers)
JEL-codes: D62 F43 O41 Q28 (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp1:290

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