We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
The capital tax paradox in a greening economy.
- Authors
Borissov, Kirill; Bretschger, Lucas; Minabutdinov, Aleksey
- Abstract
We adopt a simple model of endogenous growth with polluting capital and a fixed budget for aggregate emissions. Pollution abatement efficiency is growing over time due to technical progress. We find that long-run capital and consumption are inversely related to the initial capital stock. Capital taxation does not harm the economy but actually raises long-run consumption and production, which we call the "capital tax paradox." The reason for this surprising result is that in an economy with a binding carbon policy, early abundance of polluting capital is not a blessing but a curse. It is preferable to have a large capital stock when abatement efficiency has grown sufficiently large. The paper also provides novel results on the impact of pollution intensity and the rate of technical progress on the greening of the economy and the pollution permit prices. In the quantitative part, we calibrate model and study economic growth under different assumptions on the basic model parameters.
- Subjects
SUSTAINABLE development; CAPITAL levy; CAPITAL stock; ECONOMIC models; TECHNOLOGICAL progress; CONSUMPTION tax; CAPITAL; ENDOGENOUS growth (Economics)
- Publication
International Economics & Economic Policy, 2022, Vol 19, Issue 2, p315
- ISSN
1612-4804
- Publication type
Article
- DOI
10.1007/s10368-022-00536-7