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Endogenous growth and recycling : a material balance approach

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Abstract

In this paper we analyze the importance of recycling in the strive for sustainable development. In contrast to former approaches we emphasize the role of the waste stock as a source of valuable inputs. We enhance a Romer (1990) type endogenous growth model by a material balance condition that re°ects the circulation of matter in the economy. Di®erentiated intermediate products are produced from recycled waste and virgin resources. These material intermediates are then employed in the production of ¯nal output. They either end up as waste after consumption or are bound in the capital stock { depending on the utilization of the produced output. We show that, even in the absence of environmental policy, long-run development is sustainable in this economy. The intuition is, that, as waste is a valuable resource in our model, not recycling part of it, cannot be optimal in the long-run.

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Bibliographic Info

Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 05/37.

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Length: 37 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:eth:wpswif:05-37

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Keywords: non-renewable resources; recycling; endogenous growth; sustainable development;

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References

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  1. Di Vita, Giuseppe, 2001. "Technological change, growth and waste recycling," Energy Economics, Elsevier, Elsevier, vol. 23(5), pages 549-567, September.
  2. Smith, Vernon L, 1972. "Dynamics of Waste Accumulation: Disposal Versus Recycling," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 86(4), pages 600-616, November.
  3. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  4. Kuhn, Thomas & Pittel, Karen & Schulz, Thomas, 2003. "Recycling for sustainability - A long run perspective?," Munich Reprints in Economics, University of Munich, Department of Economics 19484, University of Munich, Department of Economics.
  5. Noel, Michael, 1978. "Resource extraction and recycling with environmental costs," Journal of Environmental Economics and Management, Elsevier, vol. 5(3), pages 220-235, September.
  6. Anni Huhtala, 1997. "A Post-Consumer Waste Management Model for Determining Optimal Levels of Recycling and Landfilling," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 10(3), pages 301-314, October.
  7. Rafael Lusky, 1976. "A Model of Recycling and Pollution Control," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 9(1), pages 91-101, February.
  8. Huhtala, Anni, 1999. "Optimizing production technology choices: conventional production vs. recycling," Resource and Energy Economics, Elsevier, Elsevier, vol. 21(1), pages 1-18, January.
  9. Thomas Kuhn & Karen Pittel & Thomas Schulz, 2003. "Recycling for sustainability - a long run perspective?," International Journal of Global Environmental Issues, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 3(3), pages 339-355.
  10. Klaus Conrad, 1999. "Resource and Waste Taxation in the Theory of the Firm with Recycling Activities," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 14(2), pages 217-242, September.
  11. Dinan Terry M., 1993. "Economic Efficiency Effects of Alternative Policies for Reducing Waste Disposal," Journal of Environmental Economics and Management, Elsevier, vol. 25(3), pages 242-256, November.
  12. Mainwaring, Lynn, 1995. "Primary resource use and voluntary recycling schemes: Dynamic issues in a global context," Resource and Energy Economics, Elsevier, Elsevier, vol. 17(4), pages 341-356, December.
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Cited by:
  1. Simone Valente, 2006. "Intergenerational Transfers, Lifetime Welfare and Resource Preservation," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 06/55, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Akao, Ken-Ichi & Managi, Shunsuke, 2007. "Feasibility and optimality of sustainable growth under materials balance," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(12), pages 3778-3790, December.
  3. Valente, Simone, 2006. "Trade, Envy and Growth: International Status Seeking in a Two-Country World," MPRA Paper 1095, University Library of Munich, Germany.
  4. Di Maria, Corrado & Valente, Simone, 2006. "The Direction of Technical Change in Capital-Resource Economies," MPRA Paper 1040, University Library of Munich, Germany.
  5. Simone Valente, 2005. "Genuine Dissaving and Optimal Growth," Others, EconWPA 0505009, EconWPA.
  6. Karen Pittel, 2006. "A Kuznets Curve for Recycling," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 06/52, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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