Sustainable Growth with Environmental Spillovers: A Ramsey-Koopmans Approach
In this paper, we apply the canonical approach of Ramsey, Koopmans, and Diamond to the problem of optimal and intertemporally-equitable growth with a non-renewable resource constraint and show that the solution is sustainable. The model is extended to cases involving environmental amenities and disamenities and renewable resources. The solutions equivalently solve the problem of maximizing net national product adjusted for depreciation in natural capital and environmental effects, which turns out to be both sustainable and constant even without technical change.
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