Local and Global Externalities, Environmental Policies and Growth
CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute
Dirk T. G. Rübbelke
Technische Universität Bergakademie Freiberg
October 29, 2010
Basque Centre for Climate Change Working Paper No. 2010-15
The paper analyzes the implications of local and global pollution when two types of abatement activities can be undertaken. One type reduces solely local pollution (e.g., use of particulate matter filters) while the other mitigates global pollution as well (e.g., application of fuel saving technologies). In the framework of a 2-country endogenous growth model, the implications of different assumptions about the degree to which global externalities are internalized are analyzed. Subsequently, we derive policy rules adapted to the different scenarios. Special attention is paid to pollution, growth and optimal policy in the case of asymmetric internalization.
Number of Pages in PDF File: 33
Keywords: economic growth, global and local externalities, government policies
JEL Classification: O4, Q53, Q54, Q58
Date posted: November 1, 2010
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