Abstract

I develop an innovative environmental new growth model driven by researchers striving for monopoly profits. Skilled labour is allocated between production vintages and two forms of research, ordinary and environmentally oriented. The intermediate sector includes fixed costs and decreasing returns, limiting the number of vintages used. I solve for planner's, laissez-faire, and regulator's solutions, and examine welfare implications and the various distortions in the model (monopoly power, knowledge spillovers, business stealing, environmental externalities). A regulator may wish: (i) to encourage environmentally oriented research; (ii) to concentrate production labour on recent (cleaner) vintages; (iii) to switch labour from production to research. An environmental sales tax may under some circumstances achieve all three-such taxes not only give incentives to reduce pollution, but also shift profits from old vintages to new, thus raising incentives to come up with newer (cleaner) vintages. An environmental tax may even lead to an increase in the rate of production growth. (C) 2004 Elsevier Inc. All rights reserved

Keywords

Endogenous growth; Innovation; Environment; Schumpeter; Porter hypothesis

Published in

Journal of Environmental Economics and Management
2004, Volume: 48, number: 3, pages: 1078-1098
Publisher: ACADEMIC PRESS INC ELSEVIER SCIENCE

SLU Authors

• Hart, Robert

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Social Sciences
Economics and Business
Environmental Sciences related to Agriculture and Land-use


Publication identifier

DOI: https://doi.org/10.1016/j.jeem.2004.02.001

Permanent link to this page (URI)

https://res.slu.se/id/publ/5155