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When Environmental Policy is Superfluous: Growth and Polluting Resources
Author(s) -
Schou Poul
Publication year - 2002
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00304
Subject(s) - economics , externality , consumption (sociology) , endogenous growth theory , sustainable growth rate , environmental policy , pollution , government (linguistics) , environmental pollution , natural resource economics , sustainable development , microeconomics , market economy , environmental protection , human capital , environmental science , ecology , social science , linguistics , philosophy , finance , sociology , biology , political science , law
In a research–driven endogenous growth model, a non–renewable resource gives rise to pollution. Consumption may either grow or decline along the optimal balanced growth path, but the (flow) pollution level necessarily diminishes continuously. Any positive balanced growth path is sustainable. Utility may improve, even though consumption declines. Although positive growth is optimal, the market economy may nevertheless result in permanently declining consumption possibilities. At the same time, a growth–enhancing government policy may improve long–run environmental conditions. The pollution externality does not distort the decisions of the market economy, so that a specific environmental policy is superfluous. JEL classification : O 41; Q 20; Q 28; Q 32