ENVIRONMENTAL-QUALITY AND POLLUTION-AUGMENTING TECHNOLOGICAL-CHANGE IN A 2-SECTOR ENDOGENOUS GROWTH-MODEL

This paper explores the link between environmental quality and economi c growth in an endogenous growth model that incorporates pollution-aug menting technological change. It examines the conditions under which s ustainable growth is both feasible and optimal. We explore also how th e government should intervene to ensure the optimal levels of natural and knowledge capital, which share a public-goods character. We establ ish the conditions for a more ambitious environmental policy to raise long-run growth.