Chapter 23 Economic growth and the environment

Environmental pollution is introduced both as a joint product and as a source of disutility in growth models. The purpose is to explore vital questions such as: is environmental protection compatible with economic growth; is it possible to have sustained growth in the long run without accumulation of pollution; what is the impact of environmental concerns on growth, and in particular, how are the levels, the paths or the growth rates of crucial variables such as capital, income, consumption or environmental pollution affected if we take into account the environment; what type of deviations do we observe between market outcomes and the social optimum; what are the policy implications of these deviations; what do data tell us about stylized facts relating environmental quality and economic development (the environmental Kuznets curve); and how can total factor productivity be decomposed into its sources once we account for the fact that an economy produces not only the desired output, but also undesirable output (environmental pollution)?