Optimal growth when environmental quality is a research asset
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Optimal growth when environmental quality is a research asset. / Groth, Christian; Ricci, Francesco .
In: Research in Economics, Vol. 65, No. 4, 2011, p. 340-352.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Optimal growth when environmental quality is a research asset
AU - Groth, Christian
AU - Ricci, Francesco
PY - 2011
Y1 - 2011
N2 - We advance an original assumption whereby a good state of the environment positively affects labor productivity in R&D such that deteriorating environmental quality negatively impacts R&D. We study the implications of this assumption for the optimal solution in an R&D-based model of growth, where the use of a non-renewable resource generates pollution. We show that in such a case, it is socially optimal to postpone extraction, as opposed to the situation in which the environment has no effect on productivity in R&D. Furthermore, insofar as environmental quality declines and subsequently recovers, we find that it is optimal to re-allocate employment to R&D in line with productivity changes. If environmental quality recovers only partially from pollution, R&D effort optimally begins above its long-run level, then progressively declines to a minimum and eventually increases to its steady-state level.
AB - We advance an original assumption whereby a good state of the environment positively affects labor productivity in R&D such that deteriorating environmental quality negatively impacts R&D. We study the implications of this assumption for the optimal solution in an R&D-based model of growth, where the use of a non-renewable resource generates pollution. We show that in such a case, it is socially optimal to postpone extraction, as opposed to the situation in which the environment has no effect on productivity in R&D. Furthermore, insofar as environmental quality declines and subsequently recovers, we find that it is optimal to re-allocate employment to R&D in line with productivity changes. If environmental quality recovers only partially from pollution, R&D effort optimally begins above its long-run level, then progressively declines to a minimum and eventually increases to its steady-state level.
U2 - 10.1016/j.rie.2011.01.005
DO - 10.1016/j.rie.2011.01.005
M3 - Journal article
VL - 65
SP - 340
EP - 352
JO - Research in Economics
JF - Research in Economics
SN - 1090-9443
IS - 4
ER -
ID: 33853269