A Simple Endogenous Growth Model with Endogenous Fertility and Environmental Concern

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 equation. 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-monotonic economic and population growth relationship.