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Undesirable growth in a model with capital accumulation and environmental assets

  • Stefano Bartolini (a1) and Luigi Bonatti (a2)

Abstract

The expansion of private production erodes the quality of commonly owned assets, thereby forcing individuals to rely increasingly on private goods to satisfy their needs. In the face of this deterioration, households increase their work effort and accumulate more capital in order to buy more consumer goods both in the present and in the future. By so doing, each household contributes to an increase in production and thus has a detrimental—though negligible—impact on commonly owned assets. Hence, the economy converges to a long-run equilibrium level of production that is higher than the level associated with the Pareto-efficient path.

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A special thank to L. Punzo and A. Leijonhufvud, who encouraged and discussed these ideas since their beginning. Thanks for useful comments also to G. Becattini, L. Bosco, E. Cresta, M. Dardi, V. Ferrante, A. Gay, D. Heymann, F. Luna, L. Marengo, G. Mondello, U. Pagano, R. Palma, M. Pugno, P. L. Sacco, A. Vercelli and to two anonymous referees. The usual disclaimer applies.

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