On the Fiscal Strategies of Escaping Poverty-Environment Traps (and) Towards Sustainable Growth
CESifo, Munich, 2014
CESifo Working Paper No. 4865
An economy with clean and dirty intermediate inputs may fall into a trap characterized by low environmental quality and low life expectancy, while the others converge to opposite steady states. We propose new strategies towards sustainable growth. They include: (i) taxes (subsidies) imposed on the production of intermediate inputs to improve environmental quality, and therefore, life expectancy and capital accumulation, in order to guarantee that an economy locked in a poverty-environment trap can escape the stagnation; (ii) taxes (subsidies) imposed on the production of intermediate inputs, consumption, and capital income in order to decentralize the transition to the social optimum.
Fiscal Policy, Macroeconomics and Growth
Resources and Environment