Sustainable Balanced Growth Research Articles

Модернизация китайского типа: эволюция концепции

The concept of “Chinese-style modernization” formulated in the end of the 1970s has been at the center of attention of the Chinese leadership and researchers since the beginning of this decade. The notion of primacy of national characteristics was transformed from a former reference to China’s weakness and backwardness to current focus on development success. Explanations of plans for China’s “basic socialist modernization” by 2035 formed the channel of influence of official policy on the academic discussions. The article analyzes contemporary Chinese comparisons of Chinese and Western paths of modernization along with theoretical reflections on the patterns of “Chinese-style modernization”. The determination to make China’s experience a reference point for policy decisions in developing countries is connected with studies in modernization theory. The question of the correlation between the general patterns of modernization and the specifics of the Chinese path of development has come to the fore. The emphasis on the differences between Chinese-style modernization and Western and Soviet models substantiates the theoretical possibility of a new development perspective for other countries, and encourages them to develop independent modernization strategies based on their own national specifics. Chinese researchers consider attempts by backward countries to copy the advanced institutions of developed nations as useless and even dangerous. China’s modernization is not complete, in the field of economic development there are mounting difficulties related to lagging behind in science and technology, deteriorating external environment, slowing growth, ageing population. While examining Chinese studies of Chinese-style modernization, it is appropriate to focus on the development of academic concepts, quantitative evaluation system and discursive system. Explorations in theory will be determined by practical achievements, first of all, by China’s ability to maintain sustainable balanced growth of the economy. The preliminary outcome can be assessed in the middle of the next decade, when China plans to build the foundations of modernization. The final judgement on the effectiveness of Chinese-style modernization will be made only after the results of China’s plans to become a world leader are known in the middle of this century.

Green Attitude and Economic Growth

We analyze the interdependence between green attitude and equilibrium development of environmental quality in an endogenous growth model. Individuals take only part of their impact on pollution into account, hence there is a negative externality of capital accumulation on environmental quality. Increasing wealth or increasing pollution enhance green attitude and reduce the externality, because individuals care more about the environment if their income is higher or if pollution is more obvious. The time path of pollution as well as the evolution of equilibrium growth are shown to depend crucially on the determinants of green attitude. Ongoing growth may lead to complete internalization of the environmental externality if green attitude improves with increasing wealth, e.g. as a consequence of an increase in environmental education. In contrast, if green attitude is determined exclusively by the level of environmental quality, pollution remains at a suboptimally high level. The interdependence of wealth and pollution in the determination of environmental awareness implies more complex dynamics. Capital growth enhances green attitude and thereby decreases pollution. Improved environmental quality in turn may increase capital growth due to less green attitude and therefore slow down convergence to the sustainable balanced growth path.

Is Environmental Protection Beneficial for the Environment?

AbstractWe analyze a simple endogenous growth model with environmental interactions. Economic production generates emissions of pollutants whose environmental impact is mitigated by abatement activities financed by government expenditure; environmental quality affects preferences but does not play any productive role. We show that government intervention, by reallocating resources from capital accumulation to environmental preservation activities, allows the economy to achieve a sustainable balanced growth path. Along such a path, softer environmental policy regimes lead to win–win outcomes, fostering economic growth and improving environmental quality. Such a result needs to be interpreted as a long run outcome, but it clearly shows that the compatibility between economic growth and environmental improvement is far from automatic. Indeed, in the long run it could paradoxically be the case that both the economy and the environment benefit from low levels of environmental protection.

Environmental Ramsey Policy and Sustainable Balanced Growth

AbstractWe study the link among economic growth, renewable natural resources and environmental policy. The context is a general equilibrium model of endogenous growth and environmental policy. We examine the conditions under which sustainable growth is both feasible and optimal, where the latter takes the form of second‐best optimal environmental Ramsey policies. We also investigate the conditions for an inverted U‐shaped relation between environmental policies and sustainable growth. We show that the combination of environmental production externalities and second‐best optimal Ramsey policies can lead to both local and global indeterminacy. The introduction of environmental policy, although well‐intentioned and designed to correct for market inefficiencies, triggers an expectations coordination problem; thereby differences in environmental quality and economic growth can be explained among countries with the same fundamentals.

Sustainable growth in a model with dual-rate discounting

In an important model of growth and pollution proposed by Stokey [Int. Econ. Rev. 39 (1998) 1] neither the rate of economic growth nor the rate of growth of emissions depends on the time preference of the representative agent, which seems somewhat paradoxical. To resolve this paradox, we introduce into Stokey's model the assumption of dual-rate discounting, prove the existence of a sustainable balanced growth optimal path, and show that the growth rates of output and emissions are increasing in the proportion between the consumption and the environmental discount factors of the representative agent.

AN ENDOGENOUS GROWTH MODEL WITH PUBLIC CAPITAL AND SUSTAINABLE GOVERNMENT DEBT

This paper presents and analyses an endogenous growth model with public capital and public debt. It is assumed that the ratio of the primary surplus to gross domestic income is a positive linear function of the debt income ratio which assures that public debt is sustainable. The paper then derives necessary conditions for the existence of a sustainable balanced growth path for the analytical model. Further, simulations are undertaken in order to gain insight into stability properties of the model and in order to analyse growth effects of deficit financed increases in public investment. The latter is done for the model on the sustainable balanced growth path as well as for the model along the transition path.

Economic Growth with Constraints on Tax Revenues and Public Debt: Implications for Fiscal Policy and Cross-Country Differences

This paper evaluates optimal public investment and fiscal policy for countries characterized by limited tax and debt capacities. We study a non stochastic CRS endogenous growth model where public expenditure is an input in the production process, in countries where distortions and limited enforceability result in limited fiscal capacities, as captured by a maximal effective tax rate. We show how persistent differences in growth rates across countries could stem from differential public finance constraints, and differentiate between the case where the public expenditure finances the flow of recurring spending (such as law enforcement), versus the stock of tangible public infrastructure. Although the flow of public expenditure raises productivity, the government should not borrow to finance it as the resulting increase in public debt would lower welfare and the growth rate. With outstanding public debt, the optimal fiscal policy should keep the debt-to-GDP ratio constant in the economy with or without a binding constraint on tax revenues as a share of GDP - current non-durable public goods should be financed only from current revenue. With investment in the stock of public infrastructure, public sector borrowing to finance the accumulation of public capital goods may allow the economy to reach a long-run optimal growth path faster. With a binding tax capacity constraint, if the ratio of the initial public/private sector stock of capital is smaller than the sustainable balanced growth ratio, the optimal policy for the government is to purchase public capital, financed by debt, to immediately attain the sustainable ratio of public capital to private capital. The sustainable steady-state ratio is endogenous to the initial public-to-private capital ratio, the tax capacity and any exogenous debt limit (say, due to sovereign risk). With capital stock adjustment costs, these statements apply to a transition of finite duration rather than an instantaneous stock jump. With either a binding exogenous debt limit or solvency constrained borrowing, a more patient country will have a higher steady-state growth rate but a lower steady-state public-to-private capital ratio.

Progressive Taxation, Public Capital, and Endogenous Growth

This paper presents and analyzes an endogenous growth model with public capital and progressive taxation. Two versions are considered: The first version assumes that the budget of the government is balanced at each point of time. The second allows for public debt but asserts that the ratio of the primary surplus to gross domestic income is a positive linear function of the debt/income ratio, which guarantees that public debt is sustainable. The paper then derives necessary conditions for the existence of a sustainable balanced growth path for the analytical model. Further, simulations are undertaken in order to gain insight into growth effects of varying the slope of the tax schedule and in order to find how the tax scheme affects the dynamics of the model.

Conservation capital and sustainable economic growth

An endogenous growth model, which links pollution to ineffective input-use, is developed to examine the potential for achieving balanced growth while preserving the environment through investment in conservation capital. We derive conditions under which individual preferences for environmental quality and private incentives for investment in conservation capital can lead to non-decreasing environmental quality with balanced growth even in the absence of environmental regulations. Additionally, conditions under which investment in conservation capital can enable an environmentally regulated economy to achieve a higher rate of sustainable balanced growth than otherwise are analysed. Copyright 2005, Oxford University Press.

Transitional Dynamics and Uniqueness of the Balanced-Growth Path in a Simple Model of Endogenous Growth with an Environmental Asset

We present an optimal endogenous growth model with an environmental asset which delivers a direct social utility value. The efficiency of the production services provided by the environmental asset directly depend on past capital accumulation. Such an assumption corresponds to assuming that past capital accumulation embodies new technologies requiring lower and lower environmental pressure per unit of output. We show that a sustainable balanced growth, where output and capital both grow at a constant positive rate, and the environmental asset remains constant over time, exists, is unique and is saddle-point stable. We discuss the implications of the optimal balanced growth path for environmental policy and show that emission taxes can be used to support subsidies on capital required to make the competitive endogenous growth rate equal to the socially optimal growth rate.