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When Environmental Policy is Superfluous: Growth and Polluting Resources

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  • Poul Schou

Abstract

In a research–driven endogenous growth model, a non–renewable resource gives rise to pollution. Consumption may either grow or decline along the optimal balanced growth path, but the (flow) pollution level necessarily diminishes continuously. Any positive balanced growth path is sustainable. Utility may improve, even though consumption declines. Although positive growth is optimal, the market economy may nevertheless result in permanently declining consumption possibilities. At the same time, a growth–enhancing government policy may improve long–run environmental conditions. The pollution externality does not distort the decisions of the market economy, so that a specific environmental policy is superfluous. JEL classification: O41; Q20; Q28; Q32

Suggested Citation

  • Poul Schou, 2002. "When Environmental Policy is Superfluous: Growth and Polluting Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 605-620, December.
    • Handle: RePEc:bla:scandj:v:104:y:2002:i:4:p:605-620
    DOI: 10.1111/1467-9442.00304
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    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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