Abstract
Pollution control with positive externality from the government is incorporated in an endogenous growth model with “AK” production function. The result indicate that if consumption and abatement expenditure grows at a constant rate, pollution stock will have smaller growth rate. The growth rate of consumption in a command economy will in general be greater than in a competitive economy. A greater intertemporal elasticity of substitution will result in a lower growth rate only if the household's preference parameter against pollution is sufficiently small. The development strategy of pursuing higher growth rate accompanied by more pollution in the early stage of economic development is economically justifiable. The utility in a wealthier economy is always higher in all stages of development than in a poorer economy, as is the pollution stock, although it may converge in the steady state.
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An earlier version of this paper was presented at the International Congress on Modelling and Simulation, December 6–10, 1993, Perth, Australia. Constructive comments and suggestions from two anonymous reviewers of this journal are greatly appreciated, and so is the financial support from the Bureau of Industrial Development in Taiwan.
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Huang, CH., Cai, D. Constant-returns endogenous growth with pollution control. Environ Resource Econ 4, 383–400 (1994). https://doi.org/10.1007/BF00692231
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DOI: https://doi.org/10.1007/BF00692231