Environmental Policy in Developing Countries : A Dynamic Analysis

I construct a dynamic model of the environmental policy formulation process in a stylized developing country (DC). Next, I analyze the employment and output effects of three pollution control policies. These policies embody different assumptions about the DC government's ability to commit to its announced course of action. I characterize the timepath of the government's policy variable, and then I show that optimality calls for an activist policy, irrespective of the length of time to which the government can commit to its announced policy. However, the effects of this activist policy depend fundamentally on the government's period of commitment