We present a simple growth model which has two original features: the strategic context considered, which is an evolutionary game, and the growth mechanism described, in which growth is caused by negative externalities. The emphasis in this growth mechanism is evidently different from that placed on positive externalities by current endogenous growth models. In this model welfare depends on three goods: leisure, a free environmental renewable resource, and a non-storable output. The environmental resource is subject to negative externalities, that is, it is deteriorated by the production of the output. Faced with a forced reduction of the resource, agents may react by increasing the labor supply in order to produce and consume substitutes for the diminishing resource, i. e. they can raise their defensive expenditures. The increase in production and consumption that follows, i.e. growth, generates a further deterioration of the environmental resource, thus giving rise to a self-feeding growth process. The conditions under which multiple equlibria and Pareto-worsening growth dynamics arise, are analysed. Beside showing the logical possibility that negative externalities are the engine of growth, we suggest that the case analysed may be of practical relevance, i.e., that negative externalities may play an important role in many episodes of growth. This role is widely recognized by social sciences other than economics. We suggest that the model may be interpreted as a push development model and that it may also contribute to explain some aspects of growth in advanced countries.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
13908.
Find related papers by JEL classification: D62 - Microeconomics - - Welfare Economics - - - Externalities O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
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