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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