Investment Choice with Polluted Capital

Johanna Etner and Pierre-André Jouvet

Papiers d'Economie Mathématique et Applications from Université Panthéon-Sorbonne (Paris 1)

Abstract: This paper develops a two-sector overlapping generations model in which one sector produces an externality on the environmental quality and the other has no effect. We assume that environmental quality degradation results from production activity of one sector. Then, we characterize the dynamical system globally and establish sufficient conditions for the global uniqueness of a perfect-foresight equilibrium path in the case of a Cobb-Douglas production function and a CES utility function. We show that the existence and the stability of the steady stare depend on subtitution and income effect and on the degree of pollution.

Keywords: ENVIRONMENT; CAPITAL; ECONOMIC GROWTH (search for similar items in EconPapers)
JEL-codes: D91 E22 O41 Q20 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1998
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Journal Article: Investment Choice with Polluted Capital (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:pariem:98.21

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