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Economic growth and abatement activities in a stochastic environment: a multi-objective approach

Author

Listed:
  • Simone Marsiglio

    (University of Wollongong)

  • Davide Torre

    (University of Milan
    Nazarbayev University)

Abstract

We analyze the effect of uncertainty on economic growth and environmental quality in a concave stochastic bicriteria dynamic problem, solved by means of scalarization techniques and the Hamilton–Jacobi–Bellman equation. Specifically, we focus on an endogenous growth model with purposive abatement activities, where environmental quality, subject to random shocks, is merely a source of utility and does not play any productive role. We show that even in the absence of direct (environmental) productivity effects, along the optimal path production results enhanced by an indirect productivity effect, which transforms environmental quality into the engine of growth. However, this does not prevent uncertainty to dampen economic and environmental performance, leading to a lower social welfare than in a deterministic framework.

Suggested Citation

  • Simone Marsiglio & Davide Torre, 2018. "Economic growth and abatement activities in a stochastic environment: a multi-objective approach," Annals of Operations Research, Springer, vol. 267(1), pages 321-334, August.
    • Handle: RePEc:spr:annopr:v:267:y:2018:i:1:d:10.1007_s10479-016-2357-3
    DOI: 10.1007/s10479-016-2357-3
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    References listed on IDEAS

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    Cited by:

    1. Herb Kunze & Davide La Torre & Simone Marsiglio, 2019. "A Multicriteria Macroeconomic Model with Intertemporal Equity and Spatial Spillovers," Papers 1911.08247, arXiv.org.
    2. La Torre, Davide & Marsiglio, Simone & Privileggi, Fabio, 2018. "Fractal Attractors in Economic Growth Models with Random Pollution Externalities," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201801, University of Turin.
    3. Simone Marsiglio & Fabio Privileggi, 2021. "On the economic growth and environmental trade-off: a multi-objective analysis," Annals of Operations Research, Springer, vol. 296(1), pages 263-289, January.
    4. Herb Kunze & Davide Torre & Simone Marsiglio, 2022. "Sustainability and spatial spillovers in a multicriteria macroeconomic model," Annals of Operations Research, Springer, vol. 311(2), pages 1067-1084, April.

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    More about this item

    Keywords

    Economic growth; Environmental quality; Uncertainty; Multiobjective; Optimization;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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