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Natural Disasters in a Two-Sector Model of Endogenous Growth

Ryo Horii and Masako Ikefuji ()
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Masako Ikefuji: Institute for Social and Economic Research, Osaka University

Working Papers from Economic Growth Center, Yale University

Abstract: This paper studies sustainability of economic growth considering the risk of natural disasters caused by pollution in an endogenous growth model with physical and human capital accumulation. It is shown that economic growth is sustainable only if the tax rate on the polluting input is increased over time and that the long-term rate of economic growth follows an inverted V-shaped curve relative to the growth rate of the environmental tax. The social welfare is maximized under a positive steady-state growth in which faster accumulation of human capital compensates the productivity loss due to declining use of the polluting input.

Keywords: human capital; global warming; environmental tax; endogenous depreciation; nonbalanced growth path (search for similar items in EconPapers)
JEL-codes: O41 H23 Q54 O13 E22 (search for similar items in EconPapers)
Date: 2010-11
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http://www.econ.yale.edu/growth_pdf/cdp992.pdf (application/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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