The Dynamic Behaviour of an Endogenous Growth Model with Public Capital and Pollution

In this paper we present an endogenous growth model with environmental pollution and public capital. As to pollution we assume that it is a by-product of aggregate production and that it negatively affects utility of the household but not production possibilities directly. The paper studies the dynamics of the model and demonstrates that there exists either a unique balanced growth path which is a saddle point or there exist two balanced growth paths with one being locally saddle point stable and one being asymptotically stable.