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Growth Theory and "Green Growth"

  • Sjak Smulders
  • Michael Toman
  • Cees Withagen

The relatively new and still amorphous concept of "Green Growth" can be understood as a call for balancing longer-term investments in sustaining environmental wealth with nearer-term income growth to reduce poverty. We draw on a large body of economic theory available for providing insights on such balancing of income growth and environmental sustainability. We show that there is a no a priori assurance of substantial positive spillovers from environmental policies to income growth, or for a monotonic transition to a "green steady state" along an optimal path. The greenness of an optimal growth path can depend heavily on initial conditions, with a variety of different adjustments occurring concurrently along an optiaml path. Factor-augmenting technical change targeting at offsetting resource depletion is critical to sustaining long-term growth within natural limits on the availability of natural resources and environmental services.

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Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 135.

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Date of creation: 2014
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Handle: RePEc:oxf:oxcrwp:135
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