Environmental Resources Depletion and Interplay Between Negative and Positive Externalities in a Growth Model
AbstractWe analyse growth dynamics in an economy where the well-being of economic agents depends on three goods: leisure, a free access environmental good and a private good which can be produced by each agent through his own labour input. The private good can be consumed as a substitute for the environmental resource. The production process of the private good by each agent generates negative externalities on the other agents, by depleting the free access natural resource; but it also produces positive externalities by increasing the productivity of labour via a learning-by-doing mechanism of accumulation of knowledge [which is a pure public good]. In this context, we show that attracting steady states may exist which are Pareto-dominated by others where aggregate private consumption and labour productivity are lower. However, negative externalities can also be an engine of desirable growth: the deterioration of the environmental good can play the role of a coordination device leading economic agents to a wider exploitation of positive externalities.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.9.
Date of creation: Jan 2005
Date of revision:
Self-protection choices; Consumption patterns; Negative externalities; Undesirable economic growth; Adaptive dynamics;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-24 (All new papers)
- NEP-ENV-2005-05-10 (Environmental Economics)
- NEP-TUR-2005-04-27 (Tourism Economics)
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