Economics at your fingertips  

Phasing out a polluting input in a growth model with directed technological change

Clas Eriksson

Economic Modelling, 2018, vol. 68, issue C, 461-474

Abstract: This paper explores the potential conflict between economic growth and the environment, and the optimal long-run environmental policy. It formulates a growth model with directed technological change and focuses on the case with low elasticity of substitution between clean and dirty inputs in production. New technology is substituted for the polluting input, which results in a gradual decline in pollution along the optimal long-run growth path. In contrast to some recent work, the era of pollution and environmental policy is here not just a transitory phase in economic development. This result means that the government's continuous efforts to reconcile economic growth and the environment will always be needed. The socially optimal policy includes a perpetual subsidy to ‘green’ research. The tax rate of pollution is monotonously increasing, while the pollution tax payments constitute a constant share of income. These policies result in a quite modest growth drag.

Keywords: Directed technological change; Pollution; Energy substitution; Growth drag (search for similar items in EconPapers)
JEL-codes: O30 O31 O33 C65 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.econmod.2017.08.022

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-05-02
Handle: RePEc:eee:ecmode:v:68:y:2018:i:c:p:461-474