11
Next we insert d£y from (7) into (3):
. ∕1 ( l l F λa0 λγ (At - F£ ) γmy , (At — Ft )γt,( (At - Ft )Ym ,
dm (1 + Am - Fm ) = de + At dt + Amdm--ddmγ - ------j-t- d t + ʌ-------— dm .
Yt y Y t y Yt y
Rearranging this equation yields
dmy = ɪ de + — dt + πmmdm, (8)
πm1πm1πm1
where πm 1 =(1 + Am - Fm ) Yt y +( At - Ft ) Ymy > 0, πmm = AmYt y +(At - Ft ) Ym > 0
and πm t = AtY t y -( At - Ft ) Y t = ( At + Ft ) Y t + [ At Fm t -(1 + Am ) Ftt ] At > 0.
Obviously, equation (8) determines the first derivatives of a function M : (e, t, m)→ my .
Hence (6) is established.
Step 2: If abatement is efficient, the set of equations (2a) - (2f) implies a function
L : (e, t, m) → t y such that
t y = L ( e, t ,m ) . (9)
++?
dmy from (3) is now plugged into (7) yielding after some calculations
d t y = ^de + p- d t + pm-dm, (10)
πm1 πm1 πm1
where Pt: = (1 + Am - Fm ) Yt + AtYm > 0 and Pm : = (1 - Fm ) Ym - [(1 + Am )Ftm - AtFmm ] Am .
In view of (10) there is a function L : (e, t, m) → ty, satisfying ty = L (e, t, m) .
++?
Step 3: The preceding steps 1 and 2 imply a production function Y : (e, t,m) → y satisfying
Ye > 0 ,Yt > 0 and Ym ∈] 0 ,Fm [.
Invoking (6) and (9) the production function (2a) is turned into
y = F [L (e, t,m) ,M (e, t,m)] = :Y (e, t,m). (11)
++? +++
The function Y defined above obviously exhibits Ye > 0 and Yt > 0 but the sign of
Ym = Ft Lm + FmMm (12)
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