On the Effect of Technological Progress on Pollution: a New Distortion in an Endogenous Growth Model

Alexandra Lopes () and Tiago Sequeira e Catarina Roseta Palma
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Tiago Sequeira e Catarina Roseta Palma: Departamento de Gestão e Economia, Universidade da Beira Interior; Departamento de Economia, ISCTE.
Authors registered in the RePEc Author Service: Catarina Roseta-Palma and Tiago Neves Sequeira

Working Papers de Gestão, Economia e Marketing (Management, Economics and Marketing Working Papers) from Universidade da Beira Interior, Departamento de Gestão e Economia (Portugal)

Abstract: We derive a model of endogenous growth with physical capital, human capital and technological progress through quality-ladders. We introduce welfare-decreasing pollution in the model, which can be reduced through the development of cleaner technologies. From the quantitative analysis of the model we show clear evidence that the new externality from technological progress to pollution considered in this model is sufficiently strong to induce underinvestment in R&D as an outcome of the decentralized equilibrium. An important policy implication of the main result of this article is a justification to subsidize the research in cleaner technologies.

Keywords: Environmental Pollution; R&D; Social Capital; Human Capital; Economic Growth (search for similar items in EconPapers)
JEL-codes: O13 O15 O31 O41 Q50 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env, nep-fdg, nep-ino and nep-mic
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