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How to substitute in order to sustain: knowledge driven growth under environmental restrictions

Published online by Cambridge University Press:  02 April 2001

LUCAS BRETSCHGER
Affiliation:
Institute for Empirical Research in Economics, University of Zurich, Blumlisalpstr. 10, 8006 Zurich, Switzerland. Tel.: +41-1-634 37 26, Fax +41-1-634 49 07, Email: lubret@iew.unizh.ch

Abstract

This paper presents different substitution mechanisms which determine, in a theoretical framework, the conditions for long-term sustainable development. In a one-sector approach and in two versions of a multi-sector endogenous growth model, the accumulation and the substitution of man-made inputs for natural resources are analysed. Assuming man-made capital to be an output of a specific sector of the economy, the elasticities of substitution between the different inputs play a more complex role than suggested by the one-sector approach. According to the multi-sector models, the prediction of growth becoming sustainable emerges as realistic, provided that the sectoral adjustment costs in the economy are not too high.

Type
Theory and Applications
Copyright
© 1998 Cambridge University Press

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