University of HelsinkiAbstract. This study examines optimal emission policy in a union of countries. In each country, labor is allocated between production and R&D which generates Poisson technological change. Production incurs emissions that are spread all over the union and aggravates pollution. Utility in any country depends negatively on both emissions and pollution in the union. The central planner of the union sets emission taxes for the countries. This study constructs a Pareto-optimal emission policy for the union.
Professor Emeritus