Abstract
This article considers a two-sector economy with externalities. In particular, the analysis involves an industrial sector whose polluting production activities have negative effects on the regeneration of a natural resource in the other sector. Without convexity or supermodularity, we prove that the economy evolves to increase the net gain of stock (a similar notion to the net gain of investment in Kamihigashi and Roy (2007)), and establish the conditions ensuring the convergence of the economy in the long run.
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