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Environmental resilience and economic growth: Command economy's optimization and environmental Kuznets curve

Listed author(s):
  • Wang, Yi-Chia
  • Chuang, Yih-Chyi

This paper constructs a two-sector environmental growth model with explicit mathematical derivation and economic intuition in a social planning economy. Through the optimal allocation of man-made capital between the production sector and the environmental sector, this paper shows that the trade-off between economic growth and environmental protection exists only when an economy deviates from its steady state. We also provide short-run transitions for both the whole economic system and individual control and state variables. In addition, technological progress in the production sector benefits economic growth rate while the improvement of technology in the environmental sector has only level effects on economic variables. This paper ends with a link between the theory and a hot empirical issue — the environmental Kuznets curve (EKC) hypothesis.

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File URL: http://www.sciencedirect.com/science/article/pii/S026499931100160X
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 6 ()
Pages: 2854-2861

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2854-2861
DOI: 10.1016/j.econmod.2011.06.028
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-893, November.
  2. Chung-Huang Huang & Deqin Cai, 1994. "Constant-returns endogenous growth with pollution control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(4), pages 383-400, August.
  3. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
  4. Grossman, G.M & Krueger, A.B., 1991. "Environmental Impacts of a North American Free Trade Agreement," Papers 158, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. J. AZNAR-MARQUEZ & J.R. Ruiz-Tamarit, 2002. "Renewable Natural Resources and Endogenous Growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Lans Bovenberg, A. & Smulders, Sjak, 1995. "Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model," Journal of Public Economics, Elsevier, vol. 57(3), pages 369-391, July.
  7. Anderson, Kent P., 1972. "Optimal growth when the stock of resources is finite and depletable," Journal of Economic Theory, Elsevier, vol. 4(2), pages 256-267, April.
  8. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  9. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  10. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," Review of Economic Studies, Oxford University Press, vol. 32(3), pages 233-240.
  11. Jhy-yuan Shieh & Ching-chong Lai & Jhy-hwa Chen, 2001. "A Comment on Huang and Cai's Constant-Returns Endogenous Growth with Pollution Control," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 20(2), pages 165-172, October.
  12. Aznar-M Rquez, J. & Ruiz-Tamarit, J.R., 2005. "Renewable Natural Resources And Endogenous Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 9(02), pages 170-197, April.
  13. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
  14. Selden Thomas M. & Song Daqing, 1995. "Neoclassical Growth, the J Curve for Abatement, and the Inverted U Curve for Pollution," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 162-168, September.
  15. Tahvonen, Olli & Kuuluvainen, Jari, 1991. "Optimal growth with renewable resources and pollution," European Economic Review, Elsevier, vol. 35(2-3), pages 650-661, April.
  16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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