Growth theory and "green growth"

Working paper

The relatively new and still amorphous concept of "Green Growth" can be understood as a call for balancing longer-term investments in sustaining environmental wealth with nearer-term income growth to reduce poverty. We draw on a large body of economic theory available for providing insights on such balancing of income growth and environmental sustainability. We show that there is no a priori assurance of substantial positive spillovers from environmental policies to income growth, or for a monotonic transition to a "green steady state" along an optimal path. The greenness of an optimal growth path can depend heavily on initial conditions, with a variety of different adjustments occurring concurrently along an optimal path. Factor-augmenting technical change targeting at offsetting resource depletion is critical to sustaining long-term growth within natural limits on the availability of natural resources and environmental services.

Authors: Smulders, S; Toman, M; Withagen, C

• Publication status: Published
• Publisher: University of Oxford
• Series: OxCarre Papers
• Publication date: 2014-03-31
• Paper number: 135
• Keywords: environment; innovation; growth; R&D spillovers; sustainable development; natural resources; natural capital