Endogenous Growth with a Ceiling on the Stock of Pollution

Kollenbach, Gilbert (2013): Endogenous Growth with a Ceiling on the Stock of Pollution.

Abstract

The effects of an agreement such as the Kyoto Protocol, which implicitly imposes a ceiling on the stock of pollution, have recently been studied in Hotelling models. We add pollution and a ceiling to the endogenous growth model of \cite{tsur2005scarcity} to study the effects of the ceiling on capital accumulation and research investments. The ceiling increases the scarcity of the exhaustible resource in the short run, which boosts backstop utilization. This implies that R\&D becomes more beneficial compared with capital accumulation. How the short run development path of an economy is affected depends on its capital endowment or richness, respectively. Only economies which are neither too rich nor too poor may invest more into research. In the long run an economy with a ceiling follows basically the same long run development path as an economy without the ceiling.

• Item Type: MPRA Paper
• Language: English
• Keywords: Endogenous growth, Environmental agreements, Fossil fuels, Nonrenewable resources, Research and Development
• Subjects: 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 > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q54 - Climate ; Natural Disasters and Their Management ; Global Warming; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation; 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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