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Temporary prosperity or sustainable development: the long-run impact of developing pollution-intensive industries

Published online by Cambridge University Press:  12 October 2023

Hongyu Nian ,
Zhiwei Xu  and
Haitao Yin
Hongyu Nian
Affiliation:
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
Zhiwei Xu
Affiliation:
School of Economics, Fudan University, Shanghai, China
Haitao Yin*
Affiliation:
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
*
Corresponding author: Haitao Yin; Email: [email protected]
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Abstract

This paper proposes a dynamic model to capture the interaction among the environment, human capital accumulation, and economic growth. We emphasize the mechanism that pollution stock depresses human capital accumulation, which has received increasing support from empirical studies. The model predicts that the development of pollution-intensive industries can help an economy gear up a short-run prosperity, but it impairs the capability for long-run economic growth, trapping the economy at a low development level. The cost for a dirty economy to switch is expensive and even infeasible if the environmental degradation is irreversible. Policy interventions, such as tax on pollution and subsidy on human capital, can help alleviate but cannot eradicate the economic stagnation.

Keywords

Environmental pollutionEconomic growthHuman capital accumulationEnvironmental Kuznets Curve
Type
Articles
Information
Macroeconomic Dynamics , Volume 28 , Issue 5 , July 2024 , pp. 1122 - 1149
Copyright
© The Author(s), 2023. Published by Cambridge University Press

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Footnotes

†

Financial supports from the National Natural Science Foundation of China (No.72022011; 71974124; 72221001), Foundation on Modern Finance Research at Shanghai Jiao Tong University are greatly appreciated.

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