Environmental Policy and Growth When Inputs are Differentiated in Pollution Intensity

44 Pages Posted: 6 Apr 2002

See all articles by Francesco Ricci

Francesco Ricci

University of Cergy-Pontoise - THEMA

Date Written: January 2002

Abstract

Environmental policy affects the distribution of market shares if intermediate goods are differentiated in pollution intensity. When innovations are environmental friendly, a tax on emissions skews demand towards new goods, which are the most productive. In this case along a balanced growth path the tax has to increase to keep the market shares of goods of different vintages constant. An increase in the burden of taxation lowers output on impact but, comparing balanced growth paths, we find that it spurs innovation. Through this channel environmental policy may increase the growth rate of the economy.

Keywords: Endogenous growth, environmental policy, induced technological change

JEL Classification: O41, Q28, H32, O30

Suggested Citation

Ricci, Francesco, Environmental Policy and Growth When Inputs are Differentiated in Pollution Intensity (January 2002). Available at SSRN: https://ssrn.com/abstract=306079 or http://dx.doi.org/10.2139/ssrn.306079

Francesco Ricci (Contact Author)

University of Cergy-Pontoise - THEMA ( email )

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F-95011 Cergy-Pontoise Cedex, 95011
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+33 1 3425 6180 (Phone)
+33 1 3425 6233 (Fax)

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