doiSerbia

Endogenous growth effects of environmental policies

Afonso Oscar (University of Porto, and OBEGEF, Faculty of Economics, Porto, Portugal)
Afonso Ana Catarina (University of Porto, Faculty of Economics, Porto, Portugal)

To analyse the impact of the environmental policies, we start by reviewing the literature on the environment, technological knowledge and economic growth. Then, we build a general equilibrium endogenous growth model where final goods are produced either in the skilled-labour intensive Clean sector or in the unskilled-labour intensive Unclean sector. By solving numerically transitional dynamics towards the unique and stable steady state, we observe that environmental policies encourage scale-invariant technological knowledge bias. This, in turn, promotes environmental quality, the skill premium and economic growth. Moreover, the impact of population growth on the steady-state growth rate is higher under strong households’ environmental conscientiousness with future generations.

Keywords: (un)clean sector, environmental policies, environmental conscientiousness, growth, wages