Quantifying distortions from pollution in a R&D endogenous growth model

In this note we study the distortions in an endogenous growth model developed by Grimaud and Tournemaine (2007), where new pieces of knowledge are produced in a R&D sector and used to reduce pollution emissions. Using this model along with a realistic calibration, we conclude that the economy st...

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Bibliographic Details
Published inEstudios de Economía Vol. 41; no. 1; pp. 149 - 159
Main Authors Neves Sequeira, Tiago, Ferreira-Lopes, Alexandra
Format Journal Article
LanguageEnglish
Published Santiago de Chile Universidad de Chile, Departamento de Economía 01.06.2014
Universidad de Chile. Departamento de Economía
Subjects
economic growth
ECONOMICS
environmental tax
pollution
R&D
subsidies
impuesto ambiental
subsidios
Pollution
I+D
crecimiento
Polución
economic growth
subsidies
environmental tax
R & D
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Summary:In this note we study the distortions in an endogenous growth model developed by Grimaud and Tournemaine (2007), where new pieces of knowledge are produced in a R&D sector and used to reduce pollution emissions. Using this model along with a realistic calibration, we conclude that the economy strongly underinvests in R&D, such that the policy maker would need to implement a strong tax-subsidy scheme to correct it. We suggest that a subsidy to human capital can also decrease the gap between market and optimal allocations.
ISSN:0718-5286
0718-5286
DOI:10.4067/S0718-52862014000100005