Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-23T13:59:41.948Z Has data issue: false hasContentIssue false
  • English
  • Français

Macroeconomic policies, second-best theory and the environment

Published online by Cambridge University Press:  31 July 2008

Karl-Göran Mäler  and
Mohan Munasinghe
Karl-Göran Mäler
Affiliation:
Beijer International Institute of Ecological Economics, Royal Swedish Academy of Sciences, Box 50005, S-104 05, Stockholm, Sweden
Mohan Munasinghe
Affiliation:
Colombo University, Colombo, Sri Lanka
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper seeks to develop a basic analytical framework that can be used to trace the environmental impacts of macroeconomic policies, and especially to identify where unforeseen negative environmental effects may occur and design remedial measures. The framework is based on a formal mathematical model which shows the second-best nature of macroeconomic policies in the presence of environmental externalities. The model confirms the empirically observed and intuitively appealing conclusion that it is the combination of macroeconomic policies and subsidiary imperfections (policy, market or institutional), rather than macroeconomic policies alone, that leads to environmental degradation. Several illustrative examples are presented from case studies in selected developing countries.

Type
Theory and Applications
Information
Environment and Development Economics , Volume 1 , Issue 2 , May 1996 , pp. 149 - 163
Copyright
Copyright © 1996, Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Arrow, K.J., and Hahn, F.H. (1971), General Competitive Analysis, San Francisco: Holden-Day Inc.; Edinburgh: Oliver and Boyd.Google Scholar
Coase, R.H. (1960), ‘The problems of social cost’, Journal of Law and Economics 3: 1–44.CrossRefGoogle Scholar
Goldin, I. and Roland-Host, D. (1994), ‘Economic policies for sustainable resource use in Morocco’, paper prepared for the Joint Meeting on Sustainable Economic Development: Domestic and International Policy,sponsored by the OECD Development Centre and CEPR,Paris,24–25 May 1993.Google Scholar
Lancaster, K. and Lipsey, R.G. (1956), ‘The general theory of second best’, Review of Economic Studies 24(1): 11–36.Google Scholar
Lopez, R. (1993), ‘Economywide policies, agricultural productivity, and environmental factors: the case of Ghana’, Workshop on Economywide Policies and the Environment, The World Bank, Washington DC, December 1993.Google Scholar
Munasinghe, M. (1996), Environmental Impact of Macroeconomic and Sectoral Policies, Washington, DC: The World Bank.Google Scholar
Munasinghe, M. and Cruz, W. (1994), Economywide Policies and the Environment, Washington, DC: The World Bank.Google Scholar
Patinkin, D. (1965), Money, Interest, and Prices, New York: Row, Peterson and Company.Google Scholar
Persson, A. and Munasinghe, M. (1995) ‘Natural resource management and economywide policies in Costa Rica: a CGE modeling approach’, World Bank Economic Review 9: 259–285.CrossRefGoogle Scholar
Unemo, L. (1993), ‘Environmental impact of government policies and external shocks in Botswana: a CGE-model approach’, Beijer Discussion Paper Series No. 26, The Beijer International Institute of Ecological Economics, Stockholm.Google Scholar