A simple endogenous growth model with endogenous fertility and environmental concern

Publication Date01 July 2017
AuthorSimone Marsiglio
Date01 July 2017
DOIhttp://doi.org/10.1111/sjpe.12125
A SIMPLE ENDOGENOUS GROWTH
MODEL WITH ENDOGENOUS
FERTILITY AND ENVIRONMENTAL
CONCERN
Simone Marsiglio
ABSTRACT
We analyze the implications of endogenous fertility choices on both economic
and environmental performances in a stylized AK-type growth model. Differently
from what traditionally assumed in the growth and environment literature, we
allow pollution to be not only a by-product of productive activities by firms but
also a result of households’ behavior, as suggested by the celebrated IPAT equa-
tion. We show that along the balanced growth path equilibrium, economic
growth may be non-monotonically related to the population growth rate as
agents care for the environment; moreover, demographic policies can be used
both to achieve win-win outcomes (simultaneously fostering economic growth
and improving environmental quality) and to stabilize the otherwise non-mono-
tonic economic and population growth relationship.
II
NTRODUCTION
In the last decades, a growing share of the economic literature has tried to analyze,
on one hand, the mutual implications between economic growth and environmen-
tal degradation (see Xepapadeas, 2005, for a survey), and on the other hand, those
between economic performance and demographic growth (see Bloom et al., 2003).
Even among policymakers it has recently emerged a wide consensus on the fact
that population, economy, and environment are deeply interrelated, thus the prob-
lem of sustainable development cannot be dealt with without a clear understanding
of their joint implications (UNEP, 2012). The nature and intensity of such interre-
lations have been extensively studied from an empirical point of view since the first
introduction of the IPAT equation (Ehrlich and Holdren, 1971), stating that envi-
ronmental impacts depend on population, affluence (consumption or productio n),
and technology. Several modifications of the IPAT equation have been advanced
over time (see, among others, the Kaya identity and the STIRPAT equation pro-
posed by Kaya, 1990, and Rosa and Dietz, 1998, respectively), and it seems now
clear that each of these three factors has a concrete and different impact on the
environment (for a recent survey, see Rosa and Dietz, 2012). Despite such a large
*University of Wollongong
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12125, Vol. 64, No. 3, July 2017
©2017 Scottish Economic Society.
263
body of empirical works, very few are the theoretical studies aimed at addressing
this issue. Indeed, only recently theoretical works have started to analyze the joint
interactions among population, economic growth, and environment. However, for
tractability purposes, this has been done by assuming that either demographic
change is exogenous (Boucekkine et al., 2014; Azomahou et al., 2015), or eco-
nomic growth is exogenous by abstracting from capital accumulation (Bosi and
Desmarchelier, 2013), or environmental dynamics is independent of the emissions
generated by productive activities (Marsiglio, 2011; Constant et al., 2014), which
are all clear oversimplifications of reality.
Our paper tries to extend this literature by simultaneously analyzing the
mutual interplays between population growth, economic growth, and the envi-
ronment. It thus relates to two different branches of the literature, both finding
their origin in the seminal work by Malthus (1798) and aiming at understanding
the nature of the relation between demographic changes and economic and envi-
ronmental performance, respectively. The potential implications of population
growth for economic performance are well known and several authors have dis-
cussed the channels through which demography interacts with economic growth
(see among others, Simon, 1981; Kelley, 1988; Barro and Becker, 1989; Boserup,
1989). Despite the huge body of works, a shared view on the issue has not arisen
yet, and alternative (pessimistic, optimistic, and neutral) views point out that
population growth may be either beneficial or detrimental or uninfluential at all
for economic activities according to a wide range of circumstances (see Bloom
et al., 2003, for a survey of such alternative views, both from theoretical and
empirical points of view). Indeed, empirical evidence suggests that there might
exist a non-monotonic relationship between population and economic growth
(Kelley and Schmidt, 1995; Boikos et al., 2013), and thus understanding a priori
the sign of such a relation is not possible. Only few works have been able to
explain from a theoretical standpoint what might cause such an eventual non-
monotonicity (Yip and Zhang, 1997; Boucekkine and Fabbri, 2013; Prettner,
2014), and our work contributes to this limited literature stream by proposing an
alternative channel related to environmental concern. Also the relation between
demography and the environment has been extensively studied (see Panayotou,
2000, for a survey), and the environment has been interpreted in terms of either
natural resources or environmental quality. While the former concept has been
the focus of theoretical works, empirical studies have mainly focused on the lat-
ter. Indeed, the main emphasis in theoretical works has traditionally been placed
on the extra stress generated by population growth on the limited availability of
land and natural resources (see, among others, Solow, 1974; Cigno, 1981; Ner-
love, 1991; Dasgupta, 1995; Peretto and Valente, 2015), while most of the empiri-
cal works have focused on the impacts of population changes on environmental
quality or pollution (Kaya, 1990; Rosa and Dietz, 1998). An important conclu-
sion of such an empirical literature is related to the fact that environmental deteri-
oration depends not only on economic activities (eventually net of green
technological progress) but also on human population; however, among the few
theoretical works that relate population growth to environmental quality (Har-
ford, 1997 1998; Schou, 2002; J
ost and Quaas, 2010), none addresses the specific
264 SIMONE MARSIGLIO
Scottish Journal of Political Economy
©2017 Scottish Economic Society

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