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Environmental Policy in an Endogenous Growth Model with Expanding Variety

Dominique Bianco ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we analyze the long-term impact of an environmental policy on economic growth, pollution and welfare. A standard growth model with horizontal innovation is modified by including pollution which comes from the use of intermediate goods production. Taxation on pollution reduces profits of final good producer as well as intermediate good producers. In this setting, profit gains is explained by a realloaction of labor from intermediate goods sector to R&D sector which enhances innovation, growth and welfare while it reduces pollution.

Keywords: Porter hypothesis; endogenous growth; environmental policy (search for similar items in EconPapers)
JEL-codes: D43 O31 O41 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene, nep-env, nep-gro and nep-ino
Date: 2017-03
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79300

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