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The Green Solow model

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  • William Brock
  • M. Taylor

Abstract

We demonstrate that a key empirical finding in environmental economics - The Environmental Kuznets Curve - and the core model of modern macroeconomics - the Solow model - are intimately related. Once we amend the Solow model to incorporate technological progress in abatement, the EKC is a necessary by product of convergence to a sustainable growth path. Our amended model, which we dub the Green Solow', generates an EKC relationship between both the flow of pollution emissions and income per capita, and the stock of environmental quality and income per capita. The resulting EKC may be humped shaped or strictly declining. We explain why current methods for estimating an EKC are likely to fail whenever they fail to account for cross-country heterogeneity in either initial conditions or deep parameters. We then develop an alternative empirical method closely related to tests of income convergence employed in the macro literature. Preliminary tests of the model's predictions are investigated using data from OECD countries.
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Suggested Citation

  • William Brock & M. Taylor, 2010. "The Green Solow model," Journal of Economic Growth, Springer, vol. 15(2), pages 127-153, June.
    • Handle: RePEc:kap:jecgro:v:15:y:2010:i:2:p:127-153
    DOI: 10.1007/s10887-010-9051-0
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    More about this item

    Keywords

    Environment; Environmental Kuznets Curve; Carbon emissions; Solow model; Sustainability; Pollution;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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