Skip to main content
×
×
Home

ENVIRONMENTAL POLICY AND GROWTH WHEN ENVIRONMENTAL AWARENESS IS ENDOGENOUS

  • Karine Constant (a1) and Marion Davin (a2)
Abstract

This paper examines the relationship between environmental policy and growth when green preferences are endogenously determined by education and pollution. We consider an environmental policy in which the government implements a tax on pollution and recycles the revenue to fund pollution abatement activities and/or an education subsidy (influencing green behaviors). When the sensitivity of agents' environmental preferences to pollution and human capital is high, the economy can converge to a balanced growth path equilibrium with damped oscillations. We show that this environmental policy can both remove the oscillations, associated with intergenerational inequalities, and enhance the long-term growth rate. However, this solution requires that the revenue from the tax rate must be allocated to education and direct environmental protection simultaneously. We demonstrate that this type of mixed-instrument environment policy is an effective way to address environmental and economic issues in both the short and the long run.

Copyright
Corresponding author
Address correspondence to: Karine Constant, Université Paris Est, Erudite, UPEC, 61 avenue du Général de Gaulle, Mail des Mèches, F-94010 Créteil, France; e-mail: karine.constant@u-pec.fr
Footnotes
Hide All

We would like to thank the editor and the two anonymous referees for their wise remarks. We are also grateful to Carine Nourry, Thomas Seegmuller, Mouez Fodha, Oded Galor, Natacha Raffin, Katheline Schubert, and Cees Withagen for their helpful comments and to the participants at the conferences OLG Days (2013, Clermont-Ferrand), LAGV (2013, Marseille), PET (2013, Lisbon), SURED (2014, Ascona), FAERE (2014, Montpellier), and of the seminar of UMR Economie Publique (2016, AgroParisTech – INRA). Supports from ANR GREEN-econ (ANR-16-CE03-0005) are acknowledged.

Footnotes
References
Hide All
Andreoni, J. (1990) Impure altruism and donations to public goods: A theory of warm-glow giving? Economic Journal 100 (401), 464477.
Bednar-Friedl, B. (2012) Climate policy targets in emerging and industrialized economies: The inflence of technological differences, environmental preferences and propensity to save. Empirica 39, 191215.
Blackburn, K. and Cipriani, G. P. (2002) A model of longevity, fertility and growth. Journal of Economic Dynamics and Control 26 (2), 187204.
Blomquist, G. C. and Whitehead, J. C. (1998) Resource quality information and validity of willingness to pay in contingent valuation. Resource and Energy Economics 20, 179196.
Brock, W. A. and Taylor, M. S. (2005) Economic growth and the environment: A review of theory and empirics. In Aghion, P. and Durlauf, S. N. (eds.), Handbook of Economic Growth, vol. 1, 1st ed., pp. 17491821. North-Holland: Elsevier.
Crumpler, H. and Grossman, P. (2008) An experimental test of warm glow giving. Journal of Public Economics 92 (5–6), 10111021.
Dunlap, R. and Scarce, R. (1991) Poll trends: Environmental problems and protection. Public Opinion Quarterly 55, 651672.
European Commission (2005) On the Review of the Sustainable Development Strategy: A Platform for Action. COM 658 final.
European Commission (2008) The Attitudes of European Citizens towards the Environment. Eurobarometer 296, DG Environment.
Fodha, M. and Seegmuller, T. (2012) A note on environmental policy and public debt stabilization. Macroeconomic Dynamics 16 (3), 477492.
Glomm, G. and Ravikumar, B. (1992) Public versus private investment in human capital: Endogenous growth and income inequality. Journal of Political Economy 100 (4), 818833.
Gradus, R. and Smulders, S. (1993) The trade-off between environmental care and long-term growth: Pollution in three prototype growth models. Journal of Economics 58, 2551.
Grimaud, A. and Tournemaine, F. (2007) Why can an environmental policy tax promote growth through the channel of education. Ecological Economics 62 (1), 2736.
John, A. and Pecchenino, R. (1994) An overlapping generations model of growth and the environment. Economic Journal 104, 13931410.
Kotchen, M. and Moore, M. (2008) Conservation: From voluntary restraint to a voluntary price premium. Environmental and Resource Economics 40 (2), 195215.
Mariani, F., Pérez-Barahona, A., and Raffin, N. (2010) Life expectancy and the environment. Journal of Economic Dynamics and Control 34 (4), 798815.
Menges, R., Schroeder, C., and Traub, S. (2005) Altruism, warm glow and the willingness-to-donate for green electricity: An artefactual field experiment. Environmental and Resource Economics 31 (4), 431458.
OECD (2007) Instrument Mixes for Environmental Policy. Paris: OECD Publishing.
OECD (2008) Promoting Sustainable Consumption - Good Practices in OECD Countries. Paris: OECD Publishing.
OECD (2010) Taxation, Innovation and the Environment. Paris: OECD Publishing.
Ono, T. (2003) Environmental tax policy in a model of growth cycles. Economic Theory 22, 141168.
Palivos, T. and Varvarigos, D. (2017) Pollution abatement as a source of stabilization and long-run growth. Macroeconomic Dynamics, 21 (3), 644676.
Pautrel, X. (2012) Environmental policy, education and growth: A reappraisal when lifetime is finite. Macroeconomic Dynamics 16 (5), 661685.
Pautrel, X. (2015) Abatement technology and the environment-growth nexus with education. Environmental and Resource Economics 61 (3), 297318.
Prieur, F. and Bréchet, T. (2013) Can education be good for both growth and the environment? Macroeconomic Dynamics 17 (5), 11351157.
Ribar, D. C. and Wilhelm, M. O. (2002) Altruistic and joy-of-giving motivations in charitable behavior. Journal of Political Economy 110 (2), 425457.
Schumacher, I. (2009) The dynamics of environmentalism and the environment. Ecological Economics 68 (11), 28422849.
Schumacher, I. and Zou, B. (2015) Threshold preferences and the environment. Journal of Mathematical Economics 60, 1727.
Scruggs, L. and Benegal, S. (2012) Declining public concern about climate change: Can we blame the great recession? Global Environmental Change 22 (2), 505515.
Seegmuller, T. and Verchère, A. (2004) Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies. Economics Letters 84, 363369.
Tjernström, E. and Tietenberg, T. (2008) Do differences in attitudes explain differences in national climate change policies? Ecological Economics 65, 315324.
Varvarigos, D. (2011) Environmental dynamics and the links between growth, volatility and mortality. Bulletin of Economic Research 65 (4), 314331.
Witzke, H. P. and Urfei, G. (2001) Willingness to pay for environmental protection in Germany: Coping with the regional dimension. Regional Studies 35 (3), 207214.
World Commission on Environment and Development (1987) Our Common Future. Oxford: Oxford University Press.
World Wide Fund for Nature (WWF) (2014) Living Planet Report 2014: Species and Spaces, People and Places. In McLellan, R., Iyengar, L., Jeffries, B. and Oerlemans, N. (eds.). Gland: Switzerland.
Xepapadeas, A. (2005) Economic growth and the environment. In Maler, K.-G. and Vincent, J. (eds.), Handbook of Environmental Economics, vol. 3, pp. 12191271. North-Holland: Elsevier.
Zhang, J. (1999) Environmental sustainability, nonlinear dynamics, and chaos. Economic Theory 14, 489500.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords:

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 19 *
Loading metrics...

Abstract views

Total abstract views: 115 *
Loading metrics...

* Views captured on Cambridge Core between 13th March 2018 - 22nd May 2018. This data will be updated every 24 hours.