Economic Growth Under Stochastic Population and Pollution Shocks

32 Pages Posted: 7 Apr 2015

See all articles by Theophile T. Azomahou

Theophile T. Azomahou

United Nations University (UNU-MERIT); Maastricht University

Tapas Mishra

Swansea University

Mamata Parhi

Swansea University

Date Written: June 2015

Abstract

We study dynamics of interactions among economic growth, population, and environmental quality when stochastic shocks in these systems display long‐memory property. We make two important contributions. First, we show that the long‐memory persistence in economic growth is determined jointly by the convergence speed of shocks in both environmental quality and population. Second, by simulating a modified Solow‐Swan economy we demonstrate that the convergence‐speed of shocks in these systems significantly affects the long‐run growth trajectory of output. Our empirical examination evince that adjustment of output to long‐run equilibrium is very slow, thanks to the slowly dissipating population and pollution shocks.

Suggested Citation

Azomahou, Theophile Thomas and Mishra, Tapas and Parhi, Mamata, Economic Growth Under Stochastic Population and Pollution Shocks (June 2015). The Manchester School, Vol. 83, Issue 3, pp. 314-345, 2015, Available at SSRN: https://ssrn.com/abstract=2591165 or http://dx.doi.org/10.1111/manc.12062

Theophile Thomas Azomahou (Contact Author)

United Nations University (UNU-MERIT) ( email )

Maastricht
Netherlands

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

Tapas Mishra

Swansea University

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

Mamata Parhi

Swansea University ( email )

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