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Environmental policy in dynamic models: The impact of the elasticity of substitution if consumers pollute

Jens Barthel ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper discusses first results of a comparative study of different environmental policy instruments. In a model with pollution as a side effect of consumption different environmental policies are studied. In simulations we observe the dynamic behavior of models with utility functions of the Leontief, CES, and Cobb-Douglas type. Environmental policy is modeled as a consumption tax. Tax revenues are used to pay a subsidy for environment-friendly activities, are reimbursed as lump-sum payments or vanish. Furthermore we investigate the implications of errors in the choice of instruments.

Keywords: Environmental policy instruments; Dynamic Model; Elasticity of substitution (search for similar items in EconPapers)
JEL-codes: C61 H23 Q58 (search for similar items in EconPapers)
Date: 2005-11-23
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