Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/127215
Authors: 
Baumgärtner, Stefan
Jöst, Frank
Winkler, Ralph
Year of Publication: 
2003
Series/Report no.: 
Discussion Paper Series, University of Heidelberg, Department of Economics 398
Abstract: 
We analyze the optimal dynamic scale and structure of a two-sector-economy, where each sector produces one consumption good and one specific pollutant. Both pollutants accumulate at different rates to stocks that damage the natural environment, which acts as a dynamic driving force for the economy. Our analysis shows that along the optimal time-path (i) the overall scale of economic activity may be less than maximal, (ii) the time-scale of structural change is mainly determined by the longer-lived pollutant, (iii) the optimal control of emissions may be non-monotonic. In particular the last result raises important questions about the design of optimal environmental policies.
Subjects: 
dynamic economy-environment interaction
multi-pollutant emissions
non-monotonic control
optimal scale
stock pollution
structural change
time scales
JEL: 
Q20
O10
O41
Document Type: 
Working Paper

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