Pollution and Economic Growth

The Journal of International Trade and Economic Development, Vol. 7(1) (March, 1998)

Posted: 10 Mar 1998

See all articles by Eric O'Neill Fisher

Eric O'Neill Fisher

California State Polytechnic University, San Luis Obispo - Orfalea College of Business

Charles van Marrewijk

Utrecht University - School of Economics

Abstract

We analyse a model of overlapping generations in which clean air, a pure public good is used as a private input into production. Although production exhibits constant returns to scale, endogenous growth can occur. In a laissez-faire equilibrium, firms generate rents that are the value of the pollution they create. These rents crowd out investment and slow economic growth. Such an equilibrium may not support Pareto optimal allocations, but a Pigouvian tax does. Hence, a pollution tax can yield a double dividend because it reduces pollution and increases growth.

JEL Classification: O13, Q28, Q38

Suggested Citation

Fisher, Eric O'Neill and van Marrewijk, Charles, Pollution and Economic Growth. The Journal of International Trade and Economic Development, Vol. 7(1) (March, 1998), Available at SSRN: https://ssrn.com/abstract=65095

Eric O'Neill Fisher

California State Polytechnic University, San Luis Obispo - Orfalea College of Business ( email )

San Luis Obispo, CA 93407
United States

Charles Van Marrewijk (Contact Author)

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands
*31-(0)30-2539810 (Phone)

HOME PAGE: http://www.charlesvanmarrewijk.nl

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