Optimal growth when environmental quality is a research asset

Christian Groth () and Francesco Ricci

Research in Economics, 2011, vol. 65, issue 4, 340-352

Abstract: We advance an original assumption whereby a good state of the environment positively affects labor productivity in R&D such that deteriorating environmental quality negatively impacts R&D. We study the implications of this assumption for the optimal solution in an R&D-based model of growth, where the use of a non-renewable resource generates pollution. We show that in such a case, it is socially optimal to postpone extraction, as opposed to the situation in which the environment has no effect on productivity in R&D. Furthermore, insofar as environmental quality declines and subsequently recovers, we find that it is optimal to re-allocate employment to R&D in line with productivity changes. If environmental quality recovers only partially from pollution, R&D effort optimally begins above its long-run level, then progressively declines to a minimum and eventually increases to its steady-state level.

Keywords: Endogenous; growth; Non-renewable; resources; Environmental; quality; Environmental; hysteresis (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Optimal growth when environmental quality is a research asset (2011)
Working Paper: Optimal growth when environmental quality is a research asset (2010)
Working Paper: Optimal growth when environmental quality is a research asset (2010)
Working Paper: Optimal growth when environmental quality is a research asset (2009)
Working Paper: Optimal Growth when Environmental Quality is a Research Asset (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:65:y:2011:i:4:p:340-352

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