A NOTE ON ENVIRONMENTAL POLICY AND PUBLIC DEBT STABILIZATION

Mouez Fodha and Thomas Seegmuller

Macroeconomic Dynamics, 2012, vol. 16, issue 3, 477-492

Abstract: This article analyzes the consequences of environmental tax policy under public debt stabilization constraint. A public sector of pollution abatement is financed by a tax on pollutant emissions and/or by public debt. At the same time, households can also invest in private pollution abatement activities. We show that the economy may be characterized by an environmental-poverty trap if debt is too large or public abatement is not sufficiently efficient with respect to the private one. However, there exists a level of public abatement and debt at which a stable steady state is optimal.

Date: 2012
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Working Paper: A Note on Environmental Policy and Public Debt Stabilization (2012)
Working Paper: A Note on Environmental Policy and Public Debt Stabilization (2012)
Working Paper: A Note on Environmental Policy and Public Debt Stabilization (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:16:y:2012:i:03:p:477-492_00

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