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Natural Disasters in a Two-Sector Model of Endogenous Growth

Masako Ikefuji () and Ryo Horii

No 06-13, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

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. We consider an environmental tax policy, and show 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 steadystate growth in which faster accumulation of human capital compensates the productivity loss due to declining use of the polluting input.

Keywords: natural disasters; human capital; endogenous depreciation; economic growth. (search for similar items in EconPapers)
JEL-codes: O41 O13 E22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-ene and nep-mac
Date: 2006-05
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http://www2.econ.osaka-u.ac.jp/library/global/dp/0613.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 (2010) Downloads
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