An Overlapping Generations Model of Growth and the Enviroment

This article analyses the potential conflict bpiween econonnic growth and the maintenance of environmental quality in an overlapping generations model. Shorl-livcd individuals make decisions which have long-lasting effects on both factor productivity and the environment. The model provides a theoretical explanation of observed correlations between environmental quality and income, whereby ecotiomic growth is associated first with declines, then improvements, in environmental quality. It suggests circumstances in which multiple Pareto-ranked steady-state equilibria may arise, and in which sustained growth of both capital and environmental quality may occur. Overmaititcnance of the environment, analogous to dynamically inefficient overaccumulation of capital, may emerge