Endogenous growth with material balance principle

Ken Ichi Akao, Shunsuke Managi

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

This paper considers how environmental problems affect economic growth. In order to explain the relationship between the economy and the environment, we impose the law of mass conservation and its corollary, the mass balance principle, and consider pollution from both production and consumption sectors. Utilising a model which incorporates the material balance principle on endogenous growth theory, we obtain the following results. • Where environmental problems are not serious, optimal economic growth rates at a steady state rise as these problems become more severe. However, there is a threshold for the degree of their seriousness, beyond which the relationship is reversed, i.e., environmental problems lower optimal economic growth rates. • A similar relationship is found between the economic growth rates at social optimum and at a laissez-faire competitive equilibrium. The optimal growth rate is higher (lower) than the equilibrium growth rate if the degree of seriousness of environmental problems is below (above) a threshold.

Original languageEnglish
Pages (from-to)4-28
Number of pages25
JournalInternational Journal of Global Environmental Issues
Volume6
Issue number1
DOIs
Publication statusPublished - 2006 Jan 1

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Keywords

  • Economic growth rate
  • Endogenous growth
  • Material balance principle

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Management, Monitoring, Policy and Law

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