Pollution, Abatementm and Sustainable Growth: A Schumpeterian Approach

and search for a difference in the pattern of environmental quality when technological progress is taken to be endogenous by extending Brock and Taylor (2003). Brock and Taylor define pollution production and abatement explicitly by considering pollution as an output of both production and abatement activities, and suggest a new approach to pollution convergence, which they name as the "Environmental Catch-up Hypothesis." Their theoretical framework relies on AK production function where production increase depends significantly on capital increase. Since pollution is generated via production, analyzing capital stock as a source of pollution is necessary. This also raises attention to the types of capital such as physical and knowledge capital where the latter is cleaner compared to the former. Using a Schumpeterian framework, we include both of these two types of capital separately in the functional form. With this approach, it is possible to observe a sustainable balanced growth path increases with steadily improving technology. We also show that a rise in technological progress causes pollution growth to decline, and the Environmental Catch-up Hypothesis holds.