Complex Dynamics Induced by Nonlinear Pollution Absorption, Pollution Emission Rate and Effectiveness of Abatement Technology in an OLG Model

Abstract

Abstract:In this work, nonlinear pollution absorption, emission rate, and effectiveness of abatement technology are incorporated into the classic overlapping generation model. Within this framework, we analyze the macroeconomic effects of pollution emission and abatement technology on the economy. Our findings reveal that different levels of pollution emission rates from per capita income and the effectiveness of abatement technology could induce complex dynamical behavior, including the occurrence of a stable equilibrium, cycles, and chaos. Our analysis shows that either the pollution emission rate per capita income should be controlled to be small enough or the effectiveness of abatement technology should be large enough to maintain a stable system yielding high level of per capita income. A high level of pollution emission rate per capita income and a low level of effectiveness of abatement technology can lead to a stable economy, but with a low level of per capita income. In the case that the pollution emission rate and the effectiveness of abatement technology vary in a certain range, the economy would become unstable, and cycles and chaos would emerge.