ENVIRONMENTAL PROTECTION AND ECONOMIC GROWTH

Abstract

This paper explores the link between an environmental policy and economic growth employing an extension of the Neoclassical Growth Model. We include a state equation to renewable natural resources, and consider natural resources as a component of the aggregate productivity. It is assumed that the change of the environmental regulations induces costs and that economic agents also derive some utility from stock capital accumulation vis-`a-vis environment. Using the Hopf bifurcation theorem, it can be shown that cyclical environmental policy strategies are optimal, providing a theoretical support to the Environmental Kuznets Curve.