On the impossibility of sustainable growth in a manufacturing based economy

Sang Won Yoon and Chang-Ho Yoon

Economic Research-Ekonomska Istraživanja, 2018, vol. 31, issue 1, 1526-1538

Abstract: This paper investigates a possibility of sustainable growth in a multi-output endogenous growth framework where the capital accumulation takes place mainly through the production of the dirty manufactured goods. It is shown that in a closed economy, economic growth is not environmentally sustainable, even under an optimal pollution tax unless the consumption elasticity of substitution between clean and dirty goods approaches infinity as in a small open economy which exports dirty goods. There exists a minimal threshold level of the ratio of clean to dirty capital that ensures sustainable growth in a closed economy.

Date: 2018
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DOI: 10.1080/1331677X.2018.1498008

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