Quantitative versus qualitative growth with recyclable resource
We reassess the issue of limits to growth in an endogenous growth model of a decentralized economy where final productions require a recyclable essential material input. The model relies on technological assumptions consistent with the material balance principle and on an explicit distinction between the material content and the quality of the produced goods. Growth follows from research activities that allow firms to improve the quality of their output and to reduce the material resource intensiveness of their production process. Even though recycling is assumed perfect, we show that 1) the material balance constraint may affect the whole transitory dynamics of the growth process; 2) quantitative growth (i.e. positive growth of material output) can only be a transitory phenomenon, long term economic growth taking exclusively the form of perpetual improvements in the quality of final goods. A long term growth path is characterized by constant values of material variables (or in a less favourable scenario, by a constant negative growth rate of those variables). We establish the existence conditions of a growth path based on quality improvements and constant material variables. It may fail to exist in a decentralized framework even though it is feasible from a purely physical point of view.
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