Environmental quality, public debt and economic development

Environmental quality, public debt and economic development / Mouez Fodha, Thomas Seegmulle. Greqam, janvier 2011, 24 p., document de travail n°2011-02.

http://halshs.archives-ouvertes.fr/halshs-00555625/fr/

This article analyzes the consequences on capital accumulation and environmental quality of environmental policies financed by public debt. A public sector of pollution abatement is financed by a tax and/or public debt. We show that if the initial capital stock is high enough, the economy monotonically converges to a long-run steady state. On the contrary, when the initial capital stock is low, the economy is relegated to an environmental-poverty trap. We also explore the implications of public policies on the trap and on the long-run stable steady state. In particular, we find that government should decrease debt and increase pollution abatement to promote capital accumulation and environmental quality at the stable long-run steady state. (© authors)


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