Pollution, public debt, and growth: The question of sustainability

Marion Davin (), Mouez Fodha and Thomas Seegmuller ()
Additional contact information
Marion Davin: CEE-M, Univ Montpellier, CNRS, INRAE, SupAgro, Montpellier, France
Thomas Seegmuller: Aix Marseille Univ, CNRS, AMSE, Marseille, France, https://www.amse-aixmarseille.fr/en/members/seegmuller

No 2418, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper examines an endogenous growth model that allows us to consider the dynamics and sustainability of debt, pollution, and growth. Debt evolves according to the financing adaptation and mitigation efforts and to the damages caused by pollution. Three types of features are important for our analysis: The technology through the negative effect of pollution on TFP; The fiscal policy; The initial level of pollution and debt with respect to capital. Indeed, if the initial level of pollution is too high, the economy is relegated to an endogenous tipping zone where pollution perpetually increases relatively to capital. If the effect of pollution on TFP is too strong, the economy cannot converge to a stable and sustainable long-run balanced growth path. If the income tax rates are high enough, we can converge to a stable balanced growth path with low pollution and high debt relative to capital. This sustainable equilibrium can even be characterized by higher growth and welfare. This last result underlines the role that tax policy can play in reconciling debt and environmental sustainability.

Keywords: Environmental damage; pollution; fiscal policy; public debt; sustainability (search for similar items in EconPapers)
JEL-codes: E60 H63 Q54 Q58 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2024-06
New Economics Papers: this item is included in nep-env, nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.amse-aixmarseille.fr/sites/default/fil ... /wp_2024_-_nr_18.pdf (application/pdf)

Related works:
Working Paper: Pollution, public debt, and growth: The question of sustainability (2024)
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: https://EconPapers.repec.org/RePEc:aim:wpaimx:2418

Access Statistics for this paper

More papers in AMSE Working Papers from Aix-Marseille School of Economics, France AMU-AMSE - 5-9 Boulevard Maurice Bourdet, CS 50498 - 13205 Marseille Cedex 1. Contact information at EDIRC.
Bibliographic data for series maintained by Gregory Cornu ().