• Selected
• Entire List

Abstract:
A model of ecologically sustainable endogenous growth is presented, in which environmental quality has a positive influence on individual welfare and on the productivity of capital. The effect of different environmental policies on the long-run growth of the economy is studied in the framework of this model. The results establish that an optimal policy which taxes production and subsidies pollution abatement has a favourable effect on environmental quality, and could increase the growth rate if the positive external effects of the environment on the productivity are important. Furthermore, it is shown that this kind of environmental policy is neutral in budgetary terms, i.e. tax receipts are equal to subsidies. Finally, it is demonstrated that a policy based on emission control will only have a positive effect on the growth rate if the initial level of environmental quality is sufficiently low.

Sustainable Growth, External Effects, Pigouvian Taxes, Emission Standards

Abstract:
We study an extended version of the one-sector AK growth model introducing adjustment and maintenance costs. Agents are allowed to under-use the installed capital and to vary the depreciation rate. The model is analyzed using particular functional forms and is solved in closed-form. We find that adjustment and maintenance costs (efficiency) reduce (increases) investment, depreciation, capital utilization and the rate of growth; impatience reduces the rate of growth but increases depreciation and utilization, which are also negatively related to the rate of population growth; the rate of growth appears positively correlated with the depreciation rate and the rate of capital utilization.

Maintenance, Depreciation, Capital Utilization, Endogenous Growth