【Notification】
This paper is recognised as a top cited article in The Manchester School bewteen 2019 and 2020.
【Impact Factor】
2019 Impact Factor: 0.622, 2019 Ranking: 320/373 in Economics / Q4: Journal Citation Reports®, 2020release, a Clarivate Analytics product.
【Abstract】
This study examines the effect of pollution permits on economic growth and welfare using a research and development based model that measures social status by a person’s wealth position in society. Under specific parameter conditions, we find that a decrease in pollution permit levels leads to an increase in the economic growth rate and improves welfare in a high steady state via the marginal rate of substitution between wealth and consumption, which is influenced by the crowding out and resource reallocation effects. This channel depends on the presence of social status preference, and we refer to this as the substitution effect.