Endogenous growth and the possibility of eliminating pollution

This paper studies the effect on optimal growth of the possibility that at some moment in the future a technology is discovered that eliminates pollut ion. We formalize this possibility as a probability p per unit of time of d iscovering such a technology. We focus on Steady-state behavior and show th at the optimal rate of growth increases with the hope of eliminating pollut ion. For an economy where there is no growth in the steady state of the opt imal trajectory when p = 0, a positive p may imply positive growth. The hig her the value of the probability, the larger the endogenous rate of growth. (C) 2001 Academic Press.