Economic growth with brown or green capital

Stefano Bosi, Cuong Le Van and Giang Phung

Journal of Mathematical Economics, 2025, vol. 117, issue C

Abstract: We study a discrete-time growth model where capital affects the productivity of other firms and can therefore be “brown” or “green”. Brown inputs, decreasing productivity, are a negative externality, while green inputs, whether human or natural, increasing productivity, are a positive externality. We prove the existence of self-consistent externalities before the existence of a competitive equilibrium, and the occurrence of two-period cycles through bifurcation analysis. In particular, externalities lead to cycles: when negative, under dominant income effects; when positive, under dominant substitution effects.

Keywords: Romer model; Brown or green capital externalities; Equilibrium existence; Local and global stability (search for similar items in EconPapers)
JEL-codes: C62 O44 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:117:y:2025:i:c:s0304406825000187

DOI: 10.1016/j.jmateco.2025.103101

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