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Environmental Taxes and Economic Growth with Multiple Growth Engines

Hamid Beladi, Chen Ping-ho (), Hu Mei-ying (), Ching-chong Lai and Hsun Chu ()

The B.E. Journal of Macroeconomics, 2021, vol. 21, issue 2, 629-658

Abstract: We develop an endogenous growth model in which long-run growth is driven by three engines: private abatement R&D, expanding-variety R&D, and capital accumulation. We show that an environmental tax activates private abatement by directing researchers from the variety R&D sector to the abatement R&D sector, which helps the economy avoid the environmental disaster. Our results also show that the effect of the environmental tax on long-run growth is uncertain, depending mainly on the relative productivity between the two R&D sectors. If the abatement R&D sector is sufficiently productive, increasing the environmental tax will enhance the balanced output growth rate and social welfare.

Keywords: private abatement R&D; endogenous growth; environmental tax; innovation (search for similar items in EconPapers)
JEL-codes: H23 O32 Q56 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1515/bejm-2020-0108

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