Long-run Sustainability in the Green Solow Model

The aim is to advance in the analytical framework of green growth and to shed light on the concept of long run sustainability. We extend the Green Solow model by including a land-capital input and land degradation as a by-product of economic activity. In this framework, the effectiveness of technological progress in abatement depends on the degree of environmental stress, measured as the excess of output growth over land-capital growth. We build land-capital data at the country level using the Enhanced Vegetation Index and calibrate the model for the USA economy. In addition, we estimate the growth equation of per capita CO2 emissions over the period 2000-2011. We find convergence at the global level, statistical significance of the environmental stress parameter and a negative effect of land-capital investment on the growth rate of emissions, implying that in the long run the positive environmental effect is stronger than the production effect.