Technical progress, structural change, and the environmental Kuznets curve

The paper shows that under reasonable assumptions about technical progress a positive sustainable growth rate fails to exist. The argument is that a growing part of income has to be spent for continuing technical progress in order to compensate the pollution effects of growth. Hence in the long run either the sustainability condition will be violated or the growth rate must decline to zero. Furthermore, in finite time the level of wealth will decrease despite growing income and a constant pollution level, thus further growth is no longer reasonable. Similar arguments also hold for the environmental effects of structural change favoring less pollution-intensive economic activities. An evolutionary change of goods and production technology may shift the limits of growth and is hence a prerequisite for a long-run EKC. (C) 2002 Elsevier Science B.V. All rights reserved.