 Phasing out a polluting input in a growth model with directed technological changeClas 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) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:68:y:2018:i:c:p:461-474 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 |
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