Environmental policy and growth when inputs are differentiated in pollution intensity

Francesco Ricci

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Abstract: Environmental policy affects the distribution of market shares if intermediate goods are differentiated in their pollution intensity. When innovations are environment-friendly, a tax on emissions skews demand towards new goods which are the most productive. In this case, the tax has to increase along a balanced growth path to keep the market shares of goods of different vintages constant. Comparing balanced growth paths, we find that tightening the policy stance spurs innovation, because it increases the market share of recent vintages, and promotes environment-friendly technological progress. As a result the cost of environmental policy in terms of slower growth is weaker.

Keywords: ENVIRONMENTAL POLICY; ENDOGENOUS GROWTH; INDUCED TECHNOLOGICAL CHANGE; POLLUTION (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (27)

Published in Environmental and Resource Economics, 2007, 38 (3), pp.285-310. ⟨10.1007/s10640-006-9076-1⟩

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Related works:
Journal Article: Environmental policy and growth when inputs are differentiated in pollution intensity (2007)
Working Paper: Environmental Policy and Growth when Inputs are Differentiated in Pollution Intensity (2007)
Working Paper: Environmental Policy and Growth when Inputs are Differentiated in Pollution Intensity (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02655437

DOI: 10.1007/s10640-006-9076-1

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