Best Policy Response to Environmental Shocks: Building a Stochastic Framework
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Author / Producer
Date
2019-09
Publication Type
Journal Article
ETH Bibliography
yes
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Abstract
The paper develops a general framework for the analysis of environmental shocks in growing economies. Endogenous capital investments allow identifying the dual role of capital as a buffer against shocks and a source of pollution. We study the effects of recurring natural disasters on optimal growth and efficient environmental policies. Emissions may cause continuous fluctuations, entail discrete and recurring jumps, or trigger so-called “tipping points” with large costs to the economy. Closed-form solutions are provided for all the model variants. We discuss possible applications in environmental economics and identify current research gaps.
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Publication status
published
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Book title
Journal / series
Volume
97
Pages / Article No.
23 - 41
Publisher
Elsevier
Event
Edition / version
Methods
Software
Geographic location
Date collected
Date created
Subject
Uncertainty; Environmental disasters; Endogenous growth; Optimal pollution abatement
Organisational unit
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)