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Environmental Resources Depletion and Interplay Between Negative and Positive Externalities in a Growth Model

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Author Info
Angelo Antoci (DEIR, University of Sassari)

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Abstract

We 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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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.9.

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Date of creation: Jan 2005
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Handle: RePEc:fem:femwpa:2005.9

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Related research
Keywords: Self-protection choices; Consumption patterns; Negative externalities; Undesirable economic growth; Adaptive dynamics;

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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

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References listed on IDEAS
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  1. Aaron Tornell & Philip Lane, 1999. "Are Windfalls a Curse? A Non-Representative Agent Model of the Current Account and Fiscal Policy," NBER Working Papers 4839, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    Other versions:
  5. Gylfason, Thorvaldur & Herbertsson, Tryggvi Thor & Zoega, Gylfi, 1997. "A Mixed Blessing: Natural Resources and Economic Growth," CEPR Discussion Papers 1668, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Bartolini, Stefano & Bonatti, Luigi, 2002. "Environmental and social degradation as the engine of economic growth," Ecological Economics, Elsevier, vol. 43(1), pages 1-16, November. [Downloadable!] (restricted)
  14. Antoci, Angelo & Bartolini, Stefano, 1999. "Negative externalities as the engine of growth in an evolutionary context," MPRA Paper 13908, University Library of Munich, Germany. [Downloadable!]
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