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POLLUTION ABATEMENT AS A SOURCE OF STABILIZATION AND LONG-RUN GROWTH

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journal contribution
posted on 27.07.2018, 14:57 by Theodore Palivos, Dimitrios Varvarigos
In a two-period overlapping-generations model with production, we consider the damaging impact of environmental degradation on health and consequently life expectancy. Despite the presence of social constant returns to capital, which would otherwise generate unbounded growth, when pollution is left unabated, the economy cannot achieve such a path. Instead, it converges either to a stationary level of capital per worker or to a cycle in which capital per worker oscillates permanently. The government's involvement in environmental preservation proves crucial for both short-term dynamics and long-term prospects of the economy. Particularly, an active policy of pollution abatement emerges as an important engine of long-run economic growth. Furthermore, by eliminating the occurrence of limit cycles, pollution abatement is also a powerful source of stabilization.

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Citation

Macroeconomic Dynamics, 2017, 21 (03), pp. 644-676

Author affiliation

/Organisation/COLLEGE OF SOCIAL SCIENCES, ARTS AND HUMANITIES/School of Business

Version

AM (Accepted Manuscript)

Published in

Macroeconomic Dynamics

Publisher

Cambridge University Press (CUP)

issn

1365-1005

eissn

1469-8056

Copyright date

2016

Available date

27/07/2018

Publisher version

https://www.cambridge.org/core/journals/macroeconomic-dynamics/article/pollution-abatement-as-a-source-of-stabilization-and-longrun-growth/22C6236CC2027BCFDC388C3D54EEB499

Language

en

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