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Government policy to reduce pollution emissions within the overlapping generations model

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  • Nissim Ben David

Abstract

This article develops an overlapping generations model with multiple categories of capital. The importance of this article is in its ability to analyse changes in the distribution of various categories of capital along the growth path of the economy. Economic growth is accompanied by capital growth as well as increase in pollution emissions. Implementing a government policy to reduce pollution emission would change the equilibrium path of capital distribution. Within the model, the government builds a corporate tax function that defines the tax rate as a function of a 'desired' pollution level. The tax rate decreases as the 'desired' pollution level is higher. When the 'desired' pollution level is higher than the actual pollution level, production is subsidized and pollution levels rise. An example and a simulation are presented in order to confirm the theoretical results and demonstrate that the model can be used for empirical analysis.

Suggested Citation

  • Nissim Ben David, 2010. "Government policy to reduce pollution emissions within the overlapping generations model," Applied Economics, Taylor & Francis Journals, vol. 42(23), pages 2985-2998.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:23:p:2985-2998
    DOI: 10.1080/00036840801964799
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    Cited by:

    1. Christidou, Maria & Panagiotidis, Theodore & Sharma, Abhijit, 2013. "On the stationarity of per capita carbon dioxide emissions over a century," Economic Modelling, Elsevier, vol. 33(C), pages 918-925.

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