Keywords: economic growth, two-sector growth model, environmental capital, climate change, environmental pollution, abatement, convergence, carbon dioxide emissions
Environment and economic growth: a convergence approach
The world economy faces a serious challenge from the global environmental degradation and appropriate environmental policy should be adopted in time to save it. The effective environmental policy prescription depends on the actual position of the economy: at what stage of growth/development the economy is. To be specific, we are interested to observe how economic growth is systematically linked to the position of the economy as well as that of the environment. Our model predicts that the average growth rate of output is inversely related to the initial level of output and directly related to the initial level of environmental condition.