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Clean versus Dirty Economic Growth

Tapio Palokangas ()

DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade

Abstract: This document considers an economy with many regions and two engines of growth: horizontal R&D, which increases the number of polluting product lines; and vertical R&D, which improves productivity in these lines. Pollution in any region decreases welfare in all regions. Any group of regions can form a jurisdiction where a common policy maker controls pollution. Large jurisdictions, which can better internalize externality through pollution, perform vertical R&D. Because jurisdictions face decreasing unit costs of administration, they expand, performing first horizontal and then vertical R&D. This generates an environmental Kuznets curve (EKC) on which pollution first aggravates and then alleviates.

Keywords: pollutants; growth and environment; endogenous public policy; economic integration; environmental Kuznets curve (search for similar items in EconPapers)
JEL-codes: O44 Q55 Q56 Q58 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2012-09
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