Consumption of Private Goods as Substitutes for Environmental Goods in an Economic Growth Model

摘要

We analyze growth dynamics in an economy where a private goodcan be consumed as a substitute for a free access environmental good. Inthis context we show that environmental deterioration may be an engine ofeconomic growth. To protect themselves against environmental deterioration,economic agents are forced to increase their labour supply to increase theproduction and consumption of the private good. This, in turn, further depletesthe environmental good, leading economic agents to further increase their laboursupply and private consumption and so on. This substitution process may giverise to self-enforcing growth dynamics characterized by a lack of correlationbetween capital accumulation and private consumption levels, on one side, andeconomic agents' welfare, on the other.Furthermore, we show that agents' self-protection consumption choices cangenerate indeterminacy; that is, they can give rise to the existence of a continuumof (Nash) equilibrium orbits leading to the same attracting fixed point or periodicorbit.