TY - JOUR
T1 - Indeterminacy and Pollution Haven Hypothesis in a Dynamic General Equilibrium Model
AU - Yanase, Akihiko
N1 - Funding Information:
Acknowledgments I wish to thank David VanHoose, the co-editor of this journal, and two anonymous referees for their helpful comments. This paper was formerly presented under the title “Indeterminacy and Comparative Advantage in a Dynamic General Equilibrium Model with Pollution”, and the author also wishes to thank Toyotaka Sakai, Ken-Ichi Akao, Kazuhiko Nishimura, Jun’ichi Itaya, Noritaka Kudoh, and Hiroshi Kurata for their helpful comments on earlier versions of the paper. This research was supported by the Grants-in-Aid for Scientific Research from the Ministry of Education, Culture, Sports, Science and Technology. The author is grateful for their support.
Publisher Copyright:
© 2014, Springer Science+Business Media New York.
PY - 2014/10/31
Y1 - 2014/10/31
N2 - This paper develops a two-sector dynamic general equilibrium model of a small open economy in which production activities are accompanied by pollution emissions that have a negative effect on welfare. It is shown that the dynamic equilibrium may display indeterminacy (i.e., continuum of dynamic equilibrium paths converging to a common steady state), depending on (i) the relationship between capital intensity and pollution intensity, (ii) the property of households’ discount rate as a function of total pollution, and (iii) the pollution-consumption relationship in instantaneous utility. In addition, the effect of environmental policy on the economy’s comparative advantage and its relation to indeterminacy are examined.
AB - This paper develops a two-sector dynamic general equilibrium model of a small open economy in which production activities are accompanied by pollution emissions that have a negative effect on welfare. It is shown that the dynamic equilibrium may display indeterminacy (i.e., continuum of dynamic equilibrium paths converging to a common steady state), depending on (i) the relationship between capital intensity and pollution intensity, (ii) the property of households’ discount rate as a function of total pollution, and (iii) the pollution-consumption relationship in instantaneous utility. In addition, the effect of environmental policy on the economy’s comparative advantage and its relation to indeterminacy are examined.
KW - Dynamic general equilibrium model
KW - Indeterminacy
KW - Pollution haven hypothesis
KW - Small open economy
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U2 - 10.1007/s11079-014-9316-x
DO - 10.1007/s11079-014-9316-x
M3 - Article
AN - SCOPUS:84930822141
VL - 25
SP - 959
EP - 980
JO - Open Economies Review
JF - Open Economies Review
SN - 0923-7992
IS - 5
ER -