Colloquium - Michael Rauscher "Economic Growth of Insiders and Outsiders of a Climate Agreement"

Abstract:
The paper considers a growth model with insiders and outsiders of an environmental agreement. We assume technological spillovers from using green and non-green technologies. In order to make the analysis tractable, I do not distinguish between a green and a conventional "dirty" technology, but introduce a "greenness" variable which characterizes the cleanliness or dirtiness of the capital stock. It is shown that increased participation in an environmental agreement increases insiders' likelihood to grow faster than outsiders. Some of the comparative-statics, which are driven by technological spillovers from outsiders to insiders are shown to give unexpected, but explainable results