IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/1999.34.html
   My bibliography  Save this paper

The Growth-Environment Trade-off: Horizontal vs Vertical Innovations

Author

Listed:
  • Andre'' Grimaud

    (GREMAQ and IDEI, Universite' de Toulouse 1)

  • Francesco Ricci

    (GREMAQ, Universite' de Toulouse 1)

Abstract

This paper explores the trade-off between economic growth and environmental quality along two paradigms of endogenous growth theory: variety expansion (HIP) and quality improvements (VIP). We compare the policies that match the decentralised economies' paths with the optimal "strong sustainable" growth path, characterised by growth in consumption and improvements in environmental quality. Three policy tools are employed: subsidies to monopolists and R&D, and taxes on emissions. The latter is increasing at the optimum, to keep the weight of tax revenues over output constant. All policy tools equal, the growth rate is higher in the VIP than in the HIP. The optimal subsidy to R&D is therefore greater and the cumulative loss in output smaller under HIP than the VIP.

Suggested Citation

  • Andre'' Grimaud & Francesco Ricci, 1999. "The Growth-Environment Trade-off: Horizontal vs Vertical Innovations," Working Papers 1999.34, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:1999.34
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL1999-034.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Sjak Smulders, 1995. "Entropy, environment, and endogenous economic growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(2), pages 319-340, August.
    2. Byrne, Margaret M., 1997. "Is growth a dirty word? Pollution, abatement and endogenous growth," Journal of Development Economics, Elsevier, vol. 54(2), pages 261-284, December.
    3. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    4. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880, Elsevier.
    5. Elbasha, Elamin H. & Roe, Terry L., 1996. "On Endogenous Growth: The Implications of Environmental Externalities," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 240-268, September.
    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Partha Dasgupta & Geoffrey Heal, 1974. "The Optimal Depletion of Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 3-28.
    8. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
    9. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andri Brenner, 2021. "The Social Power of Spillover Effects: Educating Against Environmental Externalities," CEPA Discussion Papers 35, Center for Economic Policy Analysis.
    2. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    3. Pascal da Costa, 2014. "Semi-Endogenous Growth and Pollution: No Double Dividend in the Long Term," Working Papers hal-00994904, HAL.
    4. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    5. Dagmar Nelissen & Till Requate, 2007. "Pollution-reducing and resource-saving technological progress," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 6(1), pages 5-44.
    6. Dieudonne Alemagi & Pius M. Oben & Jürgen Ertel, 2006. "Implementing environmental management systems in industries along the Atlantic coast of Cameroon: drivers, benefits and barriers," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 13(4), pages 221-232, September.
    7. Carraro, Carlo & De Cian, Enrica & Nicita, Lea & Massetti, Emanuele & Verdolini, Elena, 2010. "Environmental Policy and Technical Change: A Survey," International Review of Environmental and Resource Economics, now publishers, vol. 4(2), pages 163-219, October.
    8. Gerusa Giménez Leal & Martí Casadesús Fa & Jaume Valls Pasola, 2003. "Using environmental management systems to increase firms' competitiveness," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 10(2), pages 101-110, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dagmar Nelissen & Till Requate, 2007. "Pollution-reducing and resource-saving technological progress," International Journal of Agricultural Resources, Governance and Ecology, Inderscience Enterprises Ltd, vol. 6(1), pages 5-44.
    2. Ricci, Francesco, 2007. "Channels of transmission of environmental policy to economic growth: A survey of the theory," Ecological Economics, Elsevier, vol. 60(4), pages 688-699, February.
    3. Grimaud, Andre, 1999. "Pollution Permits and Sustainable Growth in a Schumpeterian Model," Journal of Environmental Economics and Management, Elsevier, vol. 38(3), pages 249-266, November.
    4. Afonso, Oscar, 2023. "Fiscal and monetary effects on environmental quality, growth, and welfare," Research in Economics, Elsevier, vol. 77(1), pages 202-219.
    5. Cameron Hepburn & Alex Bowen, 2013. "Prosperity with growth: economic growth, climate change and environmental limits," Chapters, in: Roger Fouquet (ed.), Handbook on Energy and Climate Change, chapter 29, pages 617-638, Edward Elgar Publishing.
    6. Wei Jin & ZhongXiang Zhang, 2016. "China's pursuit of environmentally sustainable development: Harnessing the new engine of technological innovation," CCEP Working Papers 1601, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    7. Francesco Ricci, 2007. "Environmental policy and growth when inputs are differentiated in pollution intensity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 285-310, November.
    8. Nakada, Minoru, 2005. "Deregulation in an energy market and its impact on R&D for low-carbon energy technology," Resource and Energy Economics, Elsevier, vol. 27(4), pages 306-320, November.
    9. Bretschger, Lucas, 2005. "Economics of technological change and the natural environment: How effective are innovations as a remedy for resource scarcity?," Ecological Economics, Elsevier, vol. 54(2-3), pages 148-163, August.
    10. Minoru Nakada, 2010. "Environmental Tax Reform and Growth: Income Tax Cuts or Profits Tax Reduction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(4), pages 549-565, December.
    11. Juin‐Jen Chang & Jhy‐Hwa Chen & Jhy‐Yuan Shieh & Ching‐Chong Lai, 2009. "Optimal Tax Policy, Market Imperfections, and Environmental Externalities in a Dynamic Optimizing Macro Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 623-651, August.
    12. repec:dau:papers:123456789/7769 is not listed on IDEAS
    13. Grimaud, Andre & Rouge, Luc, 2003. "Non-renewable resources and growth with vertical innovations: optimum, equilibrium and economic policies," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 433-453, March.
    14. Daisuke Ikazaki, 2014. "A Human Capital Based Growth Model with Environment and Corruption," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 3(1), pages 1-13, December.
    15. Growiec, Jakub & Schumacher, Ingmar, 2008. "On technical change in the elasticities of resource inputs," Resources Policy, Elsevier, vol. 33(4), pages 210-221, December.
    16. Le, Thanh & Le Van, Cuong, 2016. "Transitional dynamics in an R&D-based growth model with natural resources," Mathematical Social Sciences, Elsevier, vol. 82(C), pages 1-17.
    17. Agustin, PEREZ BARAHONA, 2007. "Capital Accumulation and Non-Renewable Energy Resources : a Special Functions Case," Discussion Papers (ECON - Département des Sciences Economiques) 2007008, Université catholique de Louvain, Département des Sciences Economiques.
    18. Ralph Hippe & Roger Fouquet, 2024. "The Human Capital Transition and the Role of Policy," Springer Books, in: Claude Diebolt & Michael Haupert (ed.), Handbook of Cliometrics, edition 3, pages 411-457, Springer.
    19. Ayres, Robert U, 2001. "The minimum complexity of endogenous growth models:," Energy, Elsevier, vol. 26(9), pages 817-838.
    20. Hallegatte, Stephane & Heal, Geoffrey & Fay, Marianne & Treguer, David, 2011. "From growth to green growth -- a framework," Policy Research Working Paper Series 5872, The World Bank.
    21. Oscar Afonso & Ana Catarina Afonso, 2015. "Endogenous Growth Effects of Environmental Policies," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(5), pages 607-629, December.

    More about this item

    Keywords

    Pollution; Endogenous Growth; Sustainable Development;
    All these keywords.

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:1999.34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alberto Prina Cerai (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.