China's pursuit of environmentally sustainable development: Harnessing the new engine of technological innovation

Wei Jin and ZhongXiang Zhang
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Wei Jin: School of Public Policy and Management, Zheijang University

CCEP Working Papers from Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University

Abstract: Whether China continues its business-as-usual investment-driven, environment-polluting growth pattern or adopts an investment and innovation-driven, environmentally sustainable development holds important implications for both national and global environmental governance. Building on a Ramsey-Cass-Koopmans growth model that features endogenous technological change induced by R&D and knowledge stock accumulation, this paper presents an exposition, both analytically and numerically, of the mechanism underlining China’s economic transition from an investment-driven, pollution-intensive to an investment and innovation-driven, environmentally sustainable growth path. We show that if R&D technological innovation is incorporated into China’s growth mechanism, then at some tipping point in time when marginal welfare gain of R&D for knowledge accumulation becomes equalized with that of investment for physical asset deployment, China’s economy will launch capital investment and R&D simultaneously and make a transition to a sustainable growth path along which consumption, capital investment, and R&D have a balanced share of 5: 4: 1, consumption, capital stock, and knowledge stock all grow at a rate of 4.9%, and environmental quality improves at a rate of 2.5%. In contrast, if R&D technological innovation is not harnessed as a new growth engine, then China’s economy will follow its business-as-usual investment-driven growth path along which standalone accumulation of dirty physical capital stock will lead to a more than 200-fold increase in environmental pollution.

Keywords: endogenous technological change; sustainable development; economic growth model; China’s economic transition (search for similar items in EconPapers)
JEL-codes: F18 O13 O31 O33 O44 Q43 Q48 Q55 Q58 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-cna, nep-ene, nep-env, nep-ino and nep-tra
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https://ccep.crawford.anu.edu.au/sites/default/fil ... 2016-01/ccep1601.pdf

Related works:
Working Paper: China’s pursuit of environmentally sustainable development: Harnessing the new engine of technological innovation (2016)
Working Paper: China’s Pursuit of Environmentally Sustainable Development: Harnessing the New Engine of Technological Innovation (2016)
Working Paper: China’s Pursuit of Environmentally Sustainable Development: Harnessing the New Engine of Technological Innovation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:een:ccepwp:1601

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