Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve

38 Pages Posted: 11 Jan 2010

See all articles by Santiago J. Rubio

Santiago J. Rubio

University of Valencia - Department of Economic Analysis

J.R. García

University of Valencia - Department of Economic Analysis

J.L. Hueso

Polytechnic University of Valencia

Date Written: January 8, 2010

Abstract

The paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, the environmental quality affects positively not only to utility but also to production. However, cleaner technologies can be used in the economy whether a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low then the shadow price of a cleaner technology is low relative to the cost of developing it given by the marginal utility of consumption and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with a decreasing environmental quality until the moment that pollution is great enough to make profitable the investment in R&D. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with an increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve.

Keywords: Neoclassical Growth Model, Endogenous Technological Progress, External Effects, Environmental Kuznets Curve

JEL Classification: O33, O41, Q55, Q56

Suggested Citation

Rubio Jorge, Santiago J. and García, J.R. and Hueso, J.L., Neoclassical Growth, Environment and Technological Change: The Environmental Kuznets Curve (January 8, 2010). FEEM Working Paper No. 125.2009. Available at SSRN: https://ssrn.com/abstract=1533276 or http://dx.doi.org/10.2139/ssrn.1533276

Santiago J. Rubio Jorge (Contact Author)

University of Valencia - Department of Economic Analysis ( email )

Avda. de los Naranjos s/n
46022 Valencia
Spain
+34963828219 (Phone)
+34963828249 (Fax)

J.R. García

University of Valencia - Department of Economic Analysis

Campus de los Naranjos
46022 Valencia
Spain

J.L. Hueso

Polytechnic University of Valencia

Camino de Vera, s/n
Valencia, Valencia 46022
Spain

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