Pollution along the Process of Economic Growth: A Theoretical Reappraisal
Maxime Menuet, Université d’Orléans
This paper studies the relation between pollution and growth in a small-dimension environmental growth model. We exhibit multiple equilibria and complex local and global dynamics resulting in potential indeterminacy or long-lasting pollution cycles. Furthermore, our model reveals an environmental poverty trap associated with a possible irreversibility of the environmental degradation. Environmental policy should be handled with care, because small changes in the pollution taxes may generate aggregate instability or condemn the economy to the trap. Interestingly, contrasting with traditional views, the environment Kuznets curve is not necessarily desirable, and continuously-growing pollution emissions, such as through an environmental logistic curve, is not necessarily unfavorable for sustainable growth.