Raouf Boucekkine
Aix-Marseille University
Giorgio Fabbri
University Grenoble Alpes
Salvatore Federico
DEPS, USiena
Fausto Gozzi
LUISS, Roma
Abstract
We construct a spatiotemporal frame for the study of optimal growth under transboundary pollution. Space is continuous and polluting emissions originate in the intensity of use of the production input. Pollution ows across locations following a diffusion process. The objective functional of the economy is to set the optimal production policy over time and space to maximize welfare from consumption, taking into account a negative local pollution externality and the diffusive nature of pollution. Our framework allows for space and time dependent preferences and productivity, and does not restrict diffusion speed to be spaceindependent. This provides a comprehensive setting to analyze pollution diffusion with a close account of geographic heterogeneity. The involved optimization problem is infinite-dimensional. We propose an alternative method for an analytical characterization of the optimal paths and the asymptotic spatial distributions. The method builds on a deep economic concept of pollution spatiotemporal welfare effect, which makes it denitely useful for economic analysis
Keywords
Optimal growth, spatiotemporal modelling, transboundary pollution,infinite dimensional optimal control
JEL Codes
Q53, R11, C61, R12, O41
