Green Transformation: A System Dynamics Model on Endowment, Investment and Employment

35 Pages Posted: 12 Nov 2018

See all articles by Yan Wang

Yan Wang

Cornell University; African Development Bank

Hefeng Tong

Institute of Scientific and Technical Information of China

Jiajun Xu

Institute of New Structural Economics

Date Written: June 4, 2018

Abstract

Structural transformation is critical to attaining improvements in productivity and employment generation. However, it is imperative that any structural transformation undertaken should take a green approach as the international community have placed great emphasis on achieving Sustainable Development Goals (SDGs) by 2030. Given the importance of green structural transformation, this paper attempts to explore a system dynamics (SD) model to analyze and simulate three policy options to achieve transformation to a green economy in an effort to shed new lights onto the claimed tradeoff between competitiveness and greenness. Consistent with the New Structural Economics (Lin 2010, 2011), our main analytic approach starts from the structure of endowment (stocks), followed by investment (flows) in green sectors and lastly the structure of employment and changes in labor productivity. The key findings from our simulation results are as follows: first, although there is a short run negative impact on GDP growth, the long run benefits outweigh the short run cost; secondly, green sectors will expand rapidly generating significant number of jobs; and lastly, as pollutant emissions fall along with a decline in pollutant intensity, labor force becomes healthier and more resilient thus contributing to a rise in productivity in the economy.

Keywords: Structural Transformation, Environmental Sustainability, Green Economy

JEL Classification: O13, Q50, Q58

Suggested Citation

Wang, Yan and Tong, Hefeng and Xu, Jiajun, Green Transformation: A System Dynamics Model on Endowment, Investment and Employment (June 4, 2018). Available at SSRN: https://ssrn.com/abstract=3267511 or http://dx.doi.org/10.2139/ssrn.3267511

Yan Wang (Contact Author)

Cornell University ( email )

Ithaca, NY 14853
United States

African Development Bank ( email )

Rue Joseph Anoma
Abidjan, Ivory Coast 01 BP 1387
Ivory Coast (Cote D'ivoire)

Hefeng Tong

Institute of Scientific and Technical Information of China ( email )

No.15 Fuxing Road
Beijing, 100038
China

Jiajun Xu

Institute of New Structural Economics ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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