Abstract. We study a growth model with environmental externalities where a single consumption good is obtained using a renewable resource in combination with physical capital. Both inputs are essential for production and technical substitutes. In this context we analyze the issues of sustainability, long-run, associated with the competitive equilibrium solution trajectories. We show that long-run growth and sustainability are both compatible in a natural resource based production economy.

Received: August 13, 2012

AMS Subject Classification: 37N40, 35B50, 37N35, 91B76

Key Words and Phrases: environmental economics, balanced growth path, optimal control

Download paper from here.