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Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve

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  • Santiago J. Rubio, Jose L. Garcia and Jose L. Hueso

Abstract

This paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, environmental quality has a positive effect not only on utility but also on production. Moreover, cleaner technologies can be used in the economy if a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low, then the shadow price of a cleaner technology is low in relation to the cost of developing it, given by the marginal utility of consumption, and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with environmental quality decreasing until there is enough pollution to make investing in R&D profitable. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): 30 (2009)
Issue (Month): Special Issue #2 ()
Pages: 143-168
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Handle: RePEc:aen:journl:2009se_climate_change-a07

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Cited by:
  1. Carlo Orecchia & Maria Elisabetta Tessitore, 2011. "Economic Growth and the Environment with Clean and Dirty Consumption," Working Papers 2011.57, Fondazione Eni Enrico Mattei.

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