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Natural Disasters in a Two-Sector Model of Endogenous Growth

Ryo Horii and Masako Ikefuji ()

Working Papers from Yale University, Department of Economics

Abstract: Using an endogenous growth model with physical and human capital accumulation, this paper considers the sustainability of economic growth when the use of a polluting input (e.g., fossil fuels) intensi.es the risk of capital destruction through natural disasters. We .nd that growth is sustainable only if the tax rate on the polluting input increases over time. The long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax, and it is maximized by the least aggressive tax policy from among those that asymptotically eliminate the use of polluting inputs. Moreover, welfare is maximized under an even milder environmental tax policy, especially when the pollutants accumulate gradually.

JEL-codes: H23 O41 Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-env, nep-fdg and nep-mic
Date: 2010-11
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

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http://economics.yale.edu/sites/default/files/file ... rs/wp000/ddp0086.pdf

Related works:
Journal Article: Natural disasters in a two-sector model of endogenous growth (2012) Downloads
Working Paper: Natural disasters in a two-sector model of endogenous growth (2012) Downloads
Working Paper: Natural Disasters in a Two-Sector Model of Endogenous Growth (2010) Downloads
Working Paper: Natural Disasters in a Two-Sector Model of Endogenous Growth (2010) Downloads
Working Paper: Natural Disasters in a Two-Sector Model of Endogenous Growth (2006) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:yaleco:86

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