Fight Fire with Fire: A Model of Pollution and Growth with Cooperative Settlement

Chia-Ying Chang, Chien-Chieh Huang and Ping Wang
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Chien-Chieh Huang: Department of Economics, National Dong-Hwa University, Taiwan

No 10, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: This paper establishes a growth model where firms and residents in polluted areas bargain cooperatively to settle environmental concerns. While economic development affects the extent of the negotiation outcomes, the bargaining results also influence firms' incentive to undertake R&D and thus economic growth. Due to the opposing effects of production and matching technologies, an inverted-U relationship between pollution and growth is obtained. Contrasting to growth-promoting policies, policies that create barriers to firm entry or matching may reduce pollution harming growth. Due to the opposing effects of thick-matching versus effective-discounting and pollution-externality, the decentralized outcome may involve over or under-pollution.

Keywords: Bargaining; endogenous growth; environmental externality (search for similar items in EconPapers)
JEL-codes: C78 D90 H23 Q20 (search for similar items in EconPapers)
Date: 2000-04
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:0010

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