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"Sustainable" Economic Growth: The Ominous Potency of Structural Change

  • Lopez, Ramon E.

This paper explores the conditions for sustainable development through two models of economic growth that elucidates two extremes; an open economy with constant prices, and a closed economy with endogenous prices. Sustainable development is easier to achieve in the case of the former than the latter. A closed economy requires a high degree of flexibility of its consumers, with an elasticity of substitution of clean goods substantially above 1 in order to achieve sustainable development. Three mechanisms have to work in tandem: the technique, composition, and growth-limit effects. In contrast, the open economy requires no flexibility on the part of its consumers and may achieve sustainable development through only one mechanism – the composition effect. For the open economy case, the composition effect can completely suppress the technique effect, resulting in both mechanisms acting like substitutes. On the other hand, for the closed economy case, both effects are highly complementary. The historical experience of the North indicates more similarities with the open economy paradigm.

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Paper provided by University of Maryland, Department of Agricultural and Resource Economics in its series Working Papers with number 46592.

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Date of creation: 2008
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Handle: RePEc:ags:umdrwp:46592
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  1. Werner Antweiler & Brian R. Copeland & M. Scott Taylor, 2001. "Is Free Trade Good for the Environment?," American Economic Review, American Economic Association, vol. 91(4), pages 877-908, September.
  2. Brock, William A. & Taylor, M. Scott, 2005. "Economic Growth and the Environment: A Review of Theory and Empirics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 28, pages 1749-1821 Elsevier.
  3. Kellard, Neil & Wohar, Mark E., 2006. "On the prevalence of trends in primary commodity prices," Journal of Development Economics, Elsevier, vol. 79(1), pages 146-167, February.
  4. Arik Levinson & M. Scott Taylor, 2008. "Unmasking The Pollution Haven Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 223-254, 02.
  5. Lopez, Ramon E. & Galinato, Gregmar I. & Islam, Asif M., 2009. "Pollution and the State: The Role of the Structure of Government," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48055, Australian Agricultural and Resource Economics Society.
  6. Ghertner, D. Asher & Fripp, Matthias, 2007. "Trading away damage: Quantifying environmental leakage through consumption-based, life-cycle analysis," Ecological Economics, Elsevier, vol. 63(2-3), pages 563-577, August.
  7. Lopez Ramon, 1994. "The Environment as a Factor of Production: The Effects of Economic Growth and Trade Liberalization," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 163-184, September.
  8. Lopez, Ramon E. & Stocking, Andrew, 2009. "Bringing Growth Theory "Down to Earth"," Working Papers 48944, University of Maryland, Department of Agricultural and Resource Economics.
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