On the Relation Between the Endogenous Growth Rate of the Economy and the Dynam...

• Author(s): Belbute, José Manuel Madeira ; Brito, Paulo
• Date: 2009
• Persistent ID: http://hdl.handle.net/10174/8464
• Origin: Repositório Científico da Universidade de Évora
• Subject(s): Endogenous growth; environmental preservation; habit-formation
• Document Type: Research paper
• Language: English

Description

In this paper we study a simple endogenous growth model in which the two engines of growth are the exogenous technical progress in dematerialization and the accumulation of a renewable natural resource. The model is also labeled as been "endogenous" as the rate of growth of natural capital is endogenously determined and should lie between zero and the rate of technical progress. In this context, it is possible to combine permanent economic growth with permanent growth of the environmental asset. the endogenous rate of growth of the stock of natural resources is a positive function of the physical rate of regeneration (which will occur if consumption would be zero) and of the rate of technical progress. However, in order to assure sustainability, the former growth rate should be larger than zero but smaller than the later. Second, the output growth rate (which in our model is equal to the rate of consumption) should lie between the rate of technical progress and the sum of the rate of technical progress and the natural rate of regeneration. Therefore, even in the case in which the physical rate of renewal is mall, this will allow for unbounded growth. Third, in our simple model, there is no transitional dynamics.