Environmental Pollution and Endogenous Growth: Models and Evidence from China

Abstract

A simple new classical growth model is developed to analyze the relationship between economic growth and environmental pollution, which proves the existence of the sustained growth path. This model is then endogenized to study the interaction among environmental pollution, human capital and economic growth in the long run. The similar growth path is shown and potent influences of different variables on the sustained growth are examined along the path. To bring the economy onto the sustained growth trajectory, we ought to increase human capital, implement stricter environmental standard, persist in the concept of sustained growth, build up environmental protection consciousness and improve green production technology. On the background of theoretical analysis, a simultaneous equation model is formed to empirically investigate the facts in China. The results show that Chinapsilas environment is being worsened with the rapid growth of economy. The implication is obvious. To achieve sustainable development, the Chinese government has no choice but to transform the growth pattern, to improve the industrial structure, to popularize clean technology, to reinforce pollution abatement.