Sustainable Economic Growth: Structural Transformation with Consumption Flexibility

The standard theoretical literature has shown that environmental sustainability and positive economic growth are not incompatible as long as environmental policies are optimal. However, in showing this result earlier studies have relied on strong assumptions that may appear to charge the dice in favor of such result. Here we show that once the role of the consumption composition effect is recognized, environmentally sustainable economic growth may exist even if some of the most questionable assumptions used by the canonical models are relaxed. In particular, we show that sustainable growth is possible even if environmental and man-made factors of production are complement rather than highly substitutable as has been invariably assumed by the literature and even if technological change is entirely pollution-augmenting.


Issue Date:
2013-01
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/142561
Total Pages:
37
JEL Codes:
O44; Q01; Q56
Series Statement:
Working Paper
13-01




 Record created 2017-04-01, last modified 2017-08-22

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