Growth theory and ‘green growth’

Sjak Smulders (), Michael Toman () and Cees Withagen

Oxford Review of Economic Policy, 2014, vol. 30, issue 3, 423-446

Abstract: The relatively new and still amorphous concept of ‘green growth’ can be understood as a call for balancing longer-term investments in sustaining environmental wealth with nearer-term income growth to reduce poverty. We draw on a large body of economic theory available for providing insights on such balancing of income growth and environmental sustainability. We show that there is no a priori assurance of substantial positive spillovers from environmental policies to income growth, or for a monotonic transition to a ‘green steady state’ along an optimal path. The greenness of an optimal growth path can depend heavily on initial conditions, with a variety of different adjustments occurring concurrently along an optimal path. Factor-augmenting technical-change targeting at offsetting resource depletion is critical to sustaining long-term growth within natural limits on the availability of natural resources and environmental services.

Date: 2014
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Citations: View citations in EconPapers (24)

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