Economic growth and polluting resources: Market equilibrium and optimal policies

Susana Silva, Isabel Soares and Oscar Afonso

Economic Modelling, 2013, vol. 30, issue C, 825-834

Abstract: This paper develops an endogenous growth model to study the decentralized equilibrium and the optimum conditions in an economy which uses polluting resources. The model includes two policy instruments, a subsidy to final consumption and an emissions tax. It also considers two forms of endogenous technical change, pollution-reducing knowledge and horizontal innovation. We show that, if the efficiency of knowledge to reduce emissions is sufficiently high, a higher output is compatible with lower emissions in both levels and growth rates. Additionally, if the two instruments are used together the economy may achieve a higher output and lower emissions since the subsidy may offset, at least partially, the negative tax effects.

Keywords: Natural resources; Pollution; Economic growth; Environmental policy (search for similar items in EconPapers)
JEL-codes: O13 O31 O44 Q58 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:825-834

DOI: 10.1016/j.econmod.2012.10.014

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