The Environmental and Macroeconomic Effects of Socially Responsible Investment

33 Pages Posted: 14 Jul 2008

See all articles by Lammertjan Dam

Lammertjan Dam

University of Groningen - Faculty of Economics and Business

Ben J. Heijdra

University of Groningen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 2008

Abstract

We analyze the effects of socially responsible investment and public abatement on environmental quality and the economy in a continuous-time dynamic growth model featuring optimizing households and firms. Environmental quality is modelled as a renewable resource. Consumers can invest in government bonds or firm equity. Since investors feel partly responsible for environmental pollution when holding firm equity, they require a premium on the return to equity. We show that socially responsible investment behaviour by households partially offsets the positive effects on environmental quality of public abatement policies.

Keywords: socially responsible investment, economic growth, environmental economics, resource dynamics, stock market

JEL Classification: H23, M14, O16, O41, Q21

Suggested Citation

Dam, Lammertjan and Heijdra, Ben J., The Environmental and Macroeconomic Effects of Socially Responsible Investment (July 2008). CESifo Working Paper Series No. 2349, Available at SSRN: https://ssrn.com/abstract=1159680 or http://dx.doi.org/10.2139/ssrn.1159680

Lammertjan Dam (Contact Author)

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands
+31-50-3636518 (Phone)

Ben J. Heijdra

University of Groningen - Department of Economics ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
+31 50 363 7303 (Phone)
+31 50 363 7337 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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