Dynamic Environmental Policy in Developing Countries with a Dual Economy

28 Pages Posted: 28 Jan 2001

See all articles by Dug Man Lee

Dug Man Lee

Konkuk University

Amitrajeet A. Batabyal

Rochester Institute of Technology (RIT) - Department of Economics

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Abstract

We analyze a dynamic model of environmental policy in a stylized developing country (DC) with a dual economy. This DC's economy is distorted in part because the government subsidizes the exports of the non-polluting sector of the economy. We analyze the employment and output effects of three different pollution taxes. These taxes incorporate alternate assumptions about the DC government's ability to commit to its announced course of action. We describe the taxes, we examine the dependence of these taxes on the extant distortion, and we stipulate the conditions which call for an activist policy, irrespective of the length of time to which the government can commit to its announced policy. Inter alia, our analysis shows why some DC governments may not be serious about environmental protection.

Keywords: Commitment, Developing Country, Environmental Policy, Export Subsidy

JEL Classification: O20, Q20

Suggested Citation

Lee, Dug Man and Batabyal, Amitrajeet A., Dynamic Environmental Policy in Developing Countries with a Dual Economy. Available at SSRN: https://ssrn.com/abstract=257749 or http://dx.doi.org/10.2139/ssrn.257749

Dug Man Lee

Konkuk University ( email )

380-701 Chungju
Korea

Amitrajeet A. Batabyal (Contact Author)

Rochester Institute of Technology (RIT) - Department of Economics ( email )

92 Lomb Memorial Drive
Rochester, NY 14623-5604
United States
585-475-2805 (Phone)
585-475-5777 (Fax)

HOME PAGE: http://people.rit.edu/aabgsh

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