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Is the Environment Compatible with Growth? Adopting an Integrated Framework

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  • Lucas Bretschger

    (ETH Zurich, Switzerland)

Abstract

The paper develops an integrated baseline model to assess the trade-offs be- tween the natural environment and economic growth. Consumption growth is considered under welfare and sustainability aspects. The framework features capital accumulation and the sectoral structure of the economy as key elements to cope with resource scarcity and pollution. Model extensions varying the num- ber of sectors and inputs, changing central functional forms, and introducing poor input substitution and population growth are presented. The setup high- lights the dual role of used inputs as a source of environmental problems and a part of the solution; it also discusses uncertainty and momentum effects. The paper concludes that the environment and economic growth can be compatible but that small deviations from the optimal paths my entail unsustainable de- velopment. Critical issues for sustainability are insufficient foresight, increasing damage intensity, and suboptimal policy making while population growth and poor input substitution are not necessarily precarious for future development.

Suggested Citation

  • Lucas Bretschger, 2016. "Is the Environment Compatible with Growth? Adopting an Integrated Framework," CER-ETH Economics working paper series 16/260, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  • Handle: RePEc:eth:wpswif:16-260
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    References listed on IDEAS

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    More about this item

    Keywords

    Natural environment; endogenous growth; multisector model; poor substitution; population growth;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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