Environmental sustainability, nonlinear dynamics and chaos reloaded: 0 matters!

Andrea Caravaggio and Mauro Sodini

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: In this paper, we reconsider the overlapping generations (OLG) environmental model introduced in John and Pecchenino (1994) and Zhang (1999) by adopting the specification of the environmental dynamics proposed by Naimzada and Sodini (2010). The model two different regimes that may alternate: one in which the economy and the environment co-evolve in the same direction; the other in which the environmental problem is not internalized by the agents, that is, the agents do not devolve any private resource to the environmental good, leading to a possible trade-off between environment and economic growth. The analysis of the equilibrium dynamics, described by a two dimensional piecewise smooth map, shows that starting from a parametric configuration in which the dynamics are definitely driven by a unique regime, the increase of the negative effect of the agents' consumption activity ends up in scenarios where the two regimes alternate, determining the arise of stable cycles or the occurrence of chaotic regimes. It is interesting to notice that because of the nonsmoothness of the map, the rise in environmental harm produced by economic activity may induce a sudden transition to chaotic regime.

Keywords: Bifurcations; Complex Dynamics; Overlapping Generations; Sustainability (search for similar items in EconPapers)
JEL-codes: C62 O13 O41 (search for similar items in EconPapers)
Date: 2022-09-01
New Economics Papers: this item is included in nep-dge and nep-env
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2022/287

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