October 30, 2011

Sustainable Growth and Modernization Under Environmental Hazard and Adaptation

by Natali Hritonenko and Yuri Yatsenko

- We develop an aggregated model to study rational environmental adaptation policies that
compensate negative consequences of certain environmental hazards and changes. The model
distinguishes three categories of adaptation measures that (a) compensate the decrease of the
environmental amenity value, (b) compensate the decrease of total productivity, (c) develop and
introduce new hazard-protected capital and technology. We analyze the optimal balance among
investment, consumption, and different categories of adaptation investments.

Hritonenko, N. and Y. Yatsenko (2011). "Sustainable Growth and Modernization Under Environmental Hazard and Adaptation." CORE Discussion Paper No. 2011-25, Jun 2011.