Optimal Growth with Polluting Waste and Recycling

Abstract

Abstract.We study an optimal AK-like model of capital accumulation and growth in the presence of a negative environmental externality in the tradition of Stokey (1998). Both production and consumption activities generate polluting waste. The economy exerts a recycling effort to reduce the stock of waste. Recycling also generates income, which is fully devoted to capital accumulation. The whole problem amounts to choosing the optimal control paths for consumption and recycling to maximize a social welfare function that notably includes the waste stock and disutility from the recycling effort. We provide a mathematical analysis of both the asymptotic behavior of the optimal trajectories and the shape of transition dynamics. Numerical exercises are performed to illustrate the analysis and to highlight some of the economic implications of the model.

Does China’s Municipal Solid Waste Source Separation Program Work? Evidence from the Spatial-Two-Stage-Least Squares Models

“…In addition, compared with the estimation in Table 5, the spatial spillover effect of the explanatory variable GDP per capita becomes significantly negative, namely, the increase of the GDP per capita in city i will curb the growth rate of the PMSWG in the spatial neighboring cities. Thus, obtaining wealth may be one of the best ways we can find to improve our environment today, the model fitting results are consistent with the theoretical derivation conclusion of Boucekkine and El Ouardighi (2016) [67].…”