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Pollution externalities in a Schumpeterian growth model

Author

Listed:
  • Koesler, Simon
Abstract
This paper extends a standard Schumpeterian growth model to include an environmental dimension. Thereby, it explicitly links the pollution intensity of economic activity to technological progress. In a second step, it investigates the effect of pollution on economic growth under the assumption that pollution intensities are related to technological progress. Several conclusions emerge from the model. In equilibrium, the economy follows a balanced growth path. The effect of pollution on the economic growth rate vitally depends on the households' degree of pollution aversion and on the link between pollution intensity and the technology level. The decentralized solution does not meet the social optimum, though the social optimum can be implemented through the introduction of subsidies and pollution permits. Expectedly, the introduction of a pollution threshold stalls growth if pollution is not decoupled from economic growth and the possibility of pollution abatement allows the economy to grow at a higher rate.

Suggested Citation

  • Koesler, Simon, 2010. "Pollution externalities in a Schumpeterian growth model," ZEW Discussion Papers 10-055, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:10055
    as

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    File URL: https://www.econstor.eu/bitstream/10419/40157/1/635310252.pdf
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    References listed on IDEAS

    as
    1. Grimaud, Andre, 1999. "Pollution Permits and Sustainable Growth in a Schumpeterian Model," Journal of Environmental Economics and Management, Elsevier, vol. 38(3), pages 249-266, November.
    2. Xepapadeas, Anastasios, 2005. "Economic growth and the environment," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 23, pages 1219-1271, Elsevier.
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    7. Raymond Gradus & Sjak Smulders, 1993. "The trade-off between environmental care and long-term growth—Pollution in three prototype growth models," Journal of Economics, Springer, vol. 58(1), pages 25-51, February.
    8. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    9. Greiner, Alfred & Semmler, Willi (ed.), 2008. "The Global Environment, Natural Resources, and Economic Growth," OUP Catalogue, Oxford University Press, number 9780195328233.
    10. Hart, Rob, 2004. "Growth, environment and innovation--a model with production vintages and environmentally oriented research," Journal of Environmental Economics and Management, Elsevier, vol. 48(3), pages 1078-1098, November.
    11. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Dominique Bianco, 2017. "Environmental Policy in an Endogenous Growth Model with Expanding Variety," Revue d'économie politique, Dalloz, vol. 127(6), pages 1013-1028.
    2. Koesler, Simon & Pothen, Frank, 2013. "The Basic WIOD CGE Model: A computable general equilibrium model based on the World Input-Output Database," ZEW Dokumentationen 13-04, ZEW - Leibniz Centre for European Economic Research.
    3. Afonso, Oscar, 2023. "Fiscal and monetary effects on environmental quality, growth, and welfare," Research in Economics, Elsevier, vol. 77(1), pages 202-219.

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    More about this item

    Keywords

    economic growth; endogenous pollution intensity; Schumpeter;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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