Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor

doi:10.1016/j.jmacro.2008.10.004

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Title:	Growth, welfare and transitional dynamics in an endogenously growing economy with abatement labor
Authors:	Chen, Jhy-hwa;Shieh, Jhy-yuan;Chang, Juin-jen;Lai, Ching-chong
Contributors:	淡江大學經濟學系
Keywords:	Abatement labor;Environmental externality;Public abatement;Double dividends
Date:	2009-09
Issue Date:	2011-09-28 10:01:04 (UTC+8)
Publisher:	Amsterdam: Elsevier BV * North-Holland
Abstract:	This paper sets up a simple endogenous growth model that highlights the importance of the endogenous labor-leisure choice and the allocation between production labor and abatement labor. We show that, in contrast to the common notion (e.g. [Bovenberg, A.L., Smulders, S., 1996. Transitional impacts of environmental policy in an endogenous growth model. International Economic Review 37, 861–893] and [Bovenberg, A.L., de Mooij, R.A., 1997. Environmental tax reform and endogenous growth. Journal of Public Economics 63, 207–237]), the existence of an environmental production externality is a sufficient (but not necessary) condition for environmental policies to stimulate economic growth if the labor-leisure choice is endogenously determined. In particular, since there are complementarities between public abatement and private abatement, the public abatement expenditure will have a more powerful enhancing effect on economic growth when it is accompanied by more efficient private abatement. This result also leads to a corollary to the effect that it is easier to achieve double dividends in terms of enhancing both growth and welfare if the endogenous labor-leisure choice is taken into account. In our dynamic analysis, we show that if public abatement is substantially large, dynamic indeterminacy may occur despite the absence of a positive labor externality and interestingly, this is more likely to be the case when abatement labor plays a more significant role. Besides, the transitional effects of an increase in public abatement are also investigated.
Relation:	Journal of Macroeconomics 31(3), pp.423-437
DOI:	10.1016/j.jmacro.2008.10.004
Appears in Collections:	[Graduate Institute & Department of Economics] Journal Article

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