Abatement R&D, Market Imperfections, and Environmental Policy in an Endogenous Growth Model

Chu, Hsun and Lai, Ching-Chong (2013): Abatement R&D, Market Imperfections, and Environmental Policy in an Endogenous Growth Model.

Abstract

This paper develops an endogenous growth model featuring environmental externalities, abatement R&D, and market imperfections. We compare the economic performances under three distinct regimes that encompass public abatement, private abatement without tax recycling, and private abatement with tax recycling. It is found that the benefit arising from the private conduct of abatement will be larger if the degree of the firms’ monopoly power is greater. With a reasonably high degree of monopoly power, a mixed abatement policy by which the government recycles environmental tax revenues to subsidize the private abatement R&D is a plausible way of reaching the highest growth rate and welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: abatement R&D, market imperfections, endogenous growth
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O44 - Environment and Growth; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

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