January 16, 2011

Optimal Growth when Environmental Quality is a Research Asset

by Christian Groth and Francesco Ricci

- We advance an original assumption according to which a good state of the environment positively affects the productivity of labor in R&D, so that a deteriorating environmental quality negatively impacts R&D. We study the implications of this assumption for the optimal solution in a model of growth based on R&D, where the use of a non-renewable resource generates pollution. It is shown that it is socially optimal to postpone extraction, as compared to the case with no effect of the environment on productivity in R&D.

Groth, C. and F. Ricci (2010). "Optimal Growth when Environmental Quality is a Research Asset." LERNA Working Paper, n. 10.27.333, Dec 2010.