Abstract
To reconsider the Malthusian predictions of natural limits to economic development, the paper develops a multi-sector growth model with exhaustible resource extraction, investments in physical and knowledge capital, climate change, and endogenous fertility. Economic growth is driven by endogenous innovations which increase in the availability and productivity of research labour. Poor substitution of natural resources triggers sectoral change. Climate change is the result of polluting resource use which is, like consumption and investments, based on the intertemporal optimization of the households. Highlighting the importance of bounded resource supply and of rational extraction decisions I show that climate change is independent of population growth in steady state and there is no causal relationship between climate and population during transition to steady state. The consumption per capita growth rate rises in the innovation rate and the output elasticities of labour and capital in the different sectors. Unlike climate policy, population policy is not warranted; it may be counterproductive because labour is crucial for the research sector.
Highlights
Climate change is determined by pollution stock P∞ = θ S0 which is independent of population growth; during transition, climate change and population growth are both driven by the interest rate r but there is no causal relationship between the two variables; climate damages are a constant fraction 0 < θ η < 1 of capital which is independent of population growth
This is a common result in macroeconomics but the context of population growth and climate change suggest having a closer look at the various growth conditions, which is done in the following
The paper has addressed the Malthusian concerns that population growth may significantly add to global problems in the context of climate change
Summary
Until two hundred years ago, population size was largely constrained by food supply. Technical revolutions in agriculture and industry relaxed this restriction, and a rapidly growing population could avoid the famines predicted by Malthus (1798). Summarizing the counterforces to ever growing greenhouse gas emissions, the effects of resource scarcity, technical progress, growing education, demographic transition, and climate policy will be significant. Are they strong enough to avoid the “roundabout” Malthusian trap of climate change? The present paper provides answers to these questions by developing and exploiting a novel theory framework It reframes the original Malthusian concern of natural scarcities in an up-to-date context and derives conclusions using recent achievements in resource and climate economics and macroeconomic theory. While there are widespread concerns about negative effects of a fast increasing world population on climate change, the present contribution examines endogenous growth of population and the economy in the light of climate change offering conclusions based on optimal resource extraction as well as optimal savings and investments derived in an intertemporal framework
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