The environmental Kuznets curve in a public spending model of economic growth

Diallo, Ibrahima Amadou (2014): The environmental Kuznets curve in a public spending model of economic growth.

Abstract

This paper theoretically analyzes the dynamics of economic growth and the environmental Kuznets curve. This curve states an inverse U-relationship between pollution and income. The presented model specifically shows how a dynamic environmental Kuznets curve can emerge by introducing pollution and abatement technology in a public spending model of endogenous economic growth. We also derive the turning point in function of the parameters of the model. The numerical section demonstrates that when taxes are below some threshold, the turning point decreases with taxes but it increases when taxes are above the threshold point given some explanations about an N-shaped Kuznets curve. Additionally, the simulations demonstrate that taxes reduce the level of pollution by pulling down the environmental Kuznets curve. Lastly the numerical exercises highlight that the pollution level of the social planner problem is less than that of the representative agent.

• Item Type: MPRA Paper
• Language: English
• Keywords: Abatement; Dynamic Optimization; Endogenous Growth Theory; Environmental Kuznets Curve; Numerical Simulations; Pollution; Public Spending; Taxes; Turning Point
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61 - Optimization Techniques ; Programming Models ; Dynamic Analysis; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63 - Computational Techniques ; Simulation Modeling; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; H - Public Economics > H6 - National Budget, Deficit, and Debt > H61 - Budget ; Budget Systems; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O44 - Environment and Growth

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