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Local and Global Externalities, Environmental Policies and Growth

Basque Centre for Climate Change Working Paper No. 2010-15

33 Pages Posted: 1 Nov 2010  

Karen Pittel

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg

Date Written: October 29, 2010

Abstract

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.

Keywords: economic growth, global and local externalities, government policies

JEL Classification: O4, Q53, Q54, Q58

Suggested Citation

Pittel, Karen and Rübbelke, Dirk T. G., Local and Global Externalities, Environmental Policies and Growth (October 29, 2010). Basque Centre for Climate Change Working Paper No. 2010-15. Available at SSRN: https://ssrn.com/abstract=1699651 or http://dx.doi.org/10.2139/ssrn.1699651

Karen Pittel (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg ( email )

Freiberg, 09599
Germany

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