Document Type

Student Presentation

Presentation Date

4-17-2017

Faculty Sponsor

Michail Fragkias

Abstract

Global damage and irreversible effects from climate change motivate the development of sustainable approaches to economic growth. We extend the endogenous economic growth framework introduced by Romer (1990) and Barbier (1999) with natural resource utilization in the consumption function. This opens the discussion to weak and strong sustainability. Weak sustainability allows for limitless substitution between types of capital (e.g. natural to manufactured) while strong sustainability requires avoiding crossing planetary boundaries. In our model, natural capital is central in production and innovation but has increasing costs due to depletion and pollution. The risk is very high in allowing the non-renewable resource base to deplete since natural capital is essential to the production process. Renewable resource technologies, while costly to implement, are essential as substitutes in for non-renewables in the long run as we face uncertainty from global change. We examine the implications of various natural resource scenarios in the endogenous economic growth framework. Then, we compare the growth rates, steady state, and dynamics across these models so that we more effectively capture their behavior. Finally, we explore the question of whether a weak or strong sustainability viewpoint in an endogenous growth framework leads to economic collapse or prosperity.

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