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Green CapitalA New Perspective on Growth$
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Christian de Perthuis and Pierre-André Jouvet

Print publication date: 2015

Print ISBN-13: 9780231171403

Published to Columbia Scholarship Online: May 2016

DOI: 10.7312/columbia/9780231171403.001.0001

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Beyond Hotelling

Beyond Hotelling

Natural Capital as a Factor Required for Growth

(p.76) 8 Beyond Hotelling
Green Capital

Christian de Perthuis

Pierre-André Jouvet

, Michael Westlake
Columbia University Press

We include the cost of pollution in the production function because it contributes in the short term to the supply potential of the economy, although simultaneously weakening its long-term growth path. In the short term, pricing pollution changes the preexisting combination of production factors by attributing to the use of natural capital part of the supply previously attributed to labor and capital. By pricing pollution, green capital thus affects the short-term equilibrium and becomes a factor of production in which it is necessary to invest for long-term expansion.

Keywords:   Solow, pollution costs, endogenous growth models, distributional effects

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