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Endogenous technology and environmental quality in economic models

Listed author(s):
  • Frank den Butter, Marjan W. Hofkes

The debate on the relationship between the economy and the environment focuses on the question whether there is a trade-off between economic growth and environmental quality. In order to enable a quantification of this essentially empirical question, it is necessary to integrate the environment into economic models. This article considers the integration of the environment in models of economic growth. According to these models, technical progress constitutes a major driving force for economic growth. First, we give a short survey of the theory of endogenous growth, where, unlike in traditional growth theory, the pace of economic growth may depend on economies of scale in the production process. Furthermore, it is discussed how the concept of sustainable development can be made operational within the framework of models of economic growth. Next, we give an example of both a theoretical model of endogenous growth which integrates the environment, and of an empirical model based on the theory of economic growth. Finally, mechanisms of structural change are described that may be exploited by policy makers in order to enhance environmental quality in a growing economy.

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Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Environmental Technology and Management.

Volume (Year): 1 (2001)
Issue (Month): 1/2 ()
Pages: 32-44

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Handle: RePEc:ids:ijetma:v:1:y:2001:i:1/2:p:32-44
Contact details of provider: Web page: http://www.inderscience.com/browse/index.php?journalID=11

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
  2. 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.
  3. den Butter, F. A. G. & Wollmer, F. J., 1996. "An empirical model for endogenous technology in the Netherlands," Economic Modelling, Elsevier, vol. 13(1), pages 15-40, January.
  4. Hofkes, Marjan W., 1996. "Modelling sustainable development: An economy-ecology integrated model," Economic Modelling, Elsevier, vol. 13(3), pages 333-353, July.
  5. den Butter, F. A. G. & van der Eyden, J. A. C., 1998. "A pilot index for environmental policy in The Netherlands," Energy Policy, Elsevier, vol. 26(2), pages 95-101, February.
  6. Joseph Stiglitz, 1974. "Growth with Exhaustible Natural Resources: Efficient and Optimal Growth Paths," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 123-137.
  7. Raymond Gradus & Sjak Smulders, 1993. "The trade-off between environmental care and long-term growth—Pollution in three prototype growth models," Journal of Economics, Springer, vol. 58(1), pages 25-51, February.
  8. Daly, Herman E., 1990. "Toward some operational principles of sustainable development," Ecological Economics, Elsevier, vol. 2(1), pages 1-6, April.
  9. Gruver, Gene W., 1976. "Optimal investment in pollution control capital in a neoclassical growth context," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 165-177, October.
  10. 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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