Transition to Green Industry and Recycling in a Heterogeneous-Industry and Endogenous Growth Model

Riku Watanabe

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: This study introduces two heterogeneous industries into an endogenous growth model in a circular economy. In our model, there are two types of industries, brown industries using exhaustible resources for production, and green industries using recycled goods which are reproduced from the used final good by a recycling firm. Each industry switches the state as a result of R&D activities for innovation and greening. Innovation improves the level of productivity and occurs in both industries. In contrast, only firms in brown industries invest in R&D activities for greening, which transfers the brown industries toward the green industries. This paper examines the effect of recycling and the share of green industries on the growth rate. We show that an increase in the recycling rate does not have a negative effect on the economy, and improves the welfare of households.

Date: 2025-05
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1286

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