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The quality of life in the dynamics of economic development

Published online by Cambridge University Press:  01 February 2002

Kerry Krutilla  and
Rafael Reuveny
Kerry Krutilla
Affiliation:
Associate Professor, School of Public and Environmental Affairs, Indiana University, Bloomington, Indiana 47405, krutilla@indiana.edu
Rafael Reuveny
Affiliation:
Assistant Professor, School of Public and Environmental Affairs, Indiana University, Bloomington, Indiana 47405, rreuveny@indiana.edu
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Abstract

The neoclassical economic growth model and its extensions in the fields of environmental economics and endogenous growth theory typically represent welfare as a single argument function of consumption when the models are analytically solved. This simplified welfare specification is narrower than those described in the quality-of-life literature and emphasized by proponents of sustainable development. The purpose of this paper is to analytically solve for the properties of a growth model based on a broader quality-of-life measure. The welfare measure includes two arguments, consumption and the stock of nature capital. This formulation enables an analysis of the consequences of the dynamic tension between conventionally defined economic growth and nature capital preservation. We find that a static model without technical progress yields diverse steady states, stability properties, and comparative statics, while a model with exogenous technical progress exhibits unusual comparative dynamics and balanced growth paths. These unusual outcomes have a number of policy-relevant implications for sustainable development.

Type
Research Article
Information
Environment and Development Economics , Volume 7 , Issue 1 , February 2002 , pp. 23 - 45
Copyright
© 2002 Cambridge University Press

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Footnotes

We would like to thank three anonymous referees for constructive comments that significantly added value to the final version of the paper. Remaining limitations or errors are the authors' exclusive responsibility.