Industrialization and environmental externalities in a Solow-type model |
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Affiliation: | 1. State Key Laboratory of Desert and Oasis Ecology, Xinjiang Institute of Ecology and Geography, Chinese Academy of Sciences, Urumqi 830011, China;2. University of Chinese Academy of Sciences, Beijing 100049, China;3. College of Geographical Science, Shanxi Normal University, Linfen, Shanxi 041000, China |
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Abstract: | In this paper we examine the role played by environmental externalities in shaping the dynamics of an economy with two sectors (a farming sector and an industrial one), free inter-sectoral labor mobility and heterogeneous agents (workers/farmers and industrial entrepreneurs). We find that, in the presence of the environmental pressure of the economic activity of the industrial sector, the stability properties of the equilibria and their features in terms of environmental preservation, welfare outcomes and sectoral allocation of labor are sensitive to the level of carrying capacity. We show that an endogenous process of industrialization associated with a reduction in farmers/workers׳ welfare can emerge. |
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Keywords: | Environmental negative externalities Industrialization Economic growth with heterogeneous agents |
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