PUB - Publikationen an der Universität Bielefeld

We presume a simple endogenous growth model where global warming affects economic growth and analyze the dynamics of the competitive economy and of the social optimum. Our regulatory instrument is an emission tax rate. We demonstrate that for certain values of the emission tax ratio the competitive economy exhibits multiple equilibria and a threshold may exist that separates the domains of attraction for the growth paths. There exist paths to high growth rates and low temperature and low growth rates and high temperature. For the planner's problem the long-run equilibrium is unique unless the damage of global warming is very small. (c) 2005 Elsevier B.V. All rights reserved.