Environment, Effective Demand, and Cyclical Growth in Surplus Labor Economies

Authors

DOI:

https://doi.org/10.13133/2037-3643_71.285_5

Keywords:

Environmental quality, Effective demand, Cyclical growth, Dual economies

Abstract

The study presents a simple extension of a Harrodian model, that explores, the relationship between the environment and economic growth in a hypothetical dual low-income economy with relatively low levels of environmental quality. It is supposed that the rise in effective demand increases the flow of negative externalities on the environment, which, in turn, would affect output expansion negatively in the capitalist sector through the occurrence of environmental adjustment costs. From such conflictual dynamics, the model shows that perpetual vicious circles may characterize the pattern of fluctuations in economic activity in this economy.

JEL codes: O11, O44, Q50

Author Biography

Guilherme de Oliveira, Federal University of Santa Catarina

Departament of Economics and International Relations

References

Bôjo J., Bucknall J., Hamilton K., Kishor N., Kraus C. and Pillai P. (2002), “Environment”, in Klugman J. (ed.), A Sourcebook for Poverty Reduction Strategies, vol. 1, Core Techniques and Cross-Cutting Issues (pp. 375-401), Washington (DC): The International Bank for Reconstruction and Development/The World Bank, available at: http://documents.worldbank.org/curated/en/156931468138883186/pdf/2980000182131497813.pdf

Bowles S. (2004), Microeconomics: Behavior, Institutions and Evolution, Princeton (NJ): Princeton University Press.

Brander J.A. and Taylor M.S. (1998), “The Simple Economics of Easter Island: A Ricardo-Malthus Model of Renewable Resource Use”, American Economic Review, 88 (1), pp. 119-138.

Brock W.A. and Taylor M.S. (2005), “Economic Growth and the Environment: A Review of Theory and Empirics”, in Aghion P. and Durlauf S.N. (eds.), Handbook of Economic Growth, vol. 1, Part B, of Handbook of Economic Growth (pp. 1749-1821), Amsterdam: Elsevier.

Brock W.A. and Taylor M.S. (2010), “The Green Solow Model”, Journal of Economic Growth, 15 (2), pp. 127-153.

Bulte E.H. and van Soest D.P. (2001), “Environmental Degradation in Developing Countries: Households and the (Reverse) Environmental Kuznets Curve”, Journal of Development Economics, 65 (1), pp. 225-235.

Carson R.T. (2010), “The Environmental Kuznets Curve: Seeking Empirical Regularity and Theoretical Structure”, Review of Environmental Economics and Policy, 4 (1), pp. 3-23.

Chang T., Zivin J.S.G., Gross T. and Neidell M.J. (2014), “Particulate Pollution and the Productivity of Pear Packers”, NBER Working Paper, no. 19944, Cambridge (MA): National Bureau of Economic Research, available at: http://www.nber.org/papers/w19944.pdf

Copland B.R. and Taylor M.S. (2005), Trade and the Environment: Theory and evidence, Princeton (NJ): Princeton University Press.

Cunha F. and Heckman J. (2007), “The Technology of Skill Formation”, American Economic Review, 97 (2) pp. 31-47.

Currie J. and Stabile M. (2006), “Child Mental Health and Human capital Accumulation: The Case of ADHD”, Journal of Health Economics, 25 (6), pp. 1094-1118.

Dasgupta S., Laplante B., Wang H. and Wheeler D. (2002), “Confronting the Environmental Kuznets Curve”, Journal of Economic Perspectives, 16 (1), pp. 147-168.

Dasgupta S., Deichmann U., Meisner C. and Wheeler D. (2005), “Where Is the Poverty Environment Nexus? Evidence from Cambodia, Lao Pdr, and Vietnam”, World Development, 33 (4), pp. 617-638.

Downing T., Watkiss P., Dyszynski J. et al. (2009), Economics of Climate Change in Rwanda, Oxford: Stockholm Environment Institute, available at: https://www.sei.org/mediamanager/documents/Publications /Climate/cc_economics_rwanda.pdf

Foley D.K. (2012), “Dilemmas of Economic Growth”, Eastern Economic Journal, 38, pp. 283-295.

Fontana G. and Sawyer M. (2016), “Towards Post-Keynesian Ecological Macroeconomics”, Ecological Economics, 121 (Jan), pp. 186-195.

Graff Zivin J. and Neidell M.J. (2012), “The Impact of Pollution on Worker Productivity”, American Economic Review, 102 (7), pp. 3652-73.

Graff Zivin J. and Neidell M.J. (2013), “Environment, Health, and Human Capital”, Journal of Economic Literature, 51 (3), pp. 689-730.

Graff Zivin J., Hsiang S.M. and Neidel M.J. (2015), “Temperature and Human Capital in the Short- and Long-Run”, NBER Working Paper, no. 21157, Cambridge (MA): National Bureau of Economic Research, available at: http://www.nber.org/papers/w21157.pdf

Grossman G.M. and Krueger A.B. (1995), “Economic Growth and the Environment”, Quarterly Journal of Economics, 110 (2), pp. 353-377.

Guarini G. (2015), “Complementarity between Environmental Efficiency and Labor Productivity in a Cumulative Growth Process”, PSL Quarterly Review, 68 (272), pp. 41-56.

Guarini G. and Porcile G. (2016), “Sustainability in a Post-Keynesian Growth Model for an Open Economy”, Ecological Economics, 126 (Jun), pp. 14-22.

Harris J. (2013), “Green Keynesianism: Beyond Standard Growth Paradigms”, GDAE Working Papers, no. 13-02, Medford (MA): Tufts University, Global Development and Environment Institute, available at: http://www.ase.tufts.edu/gdae/Pubs/wp/13-02HarrisGreenKeynesianism.pdf

Harrod R.F. (1939), “An Essay in Dynamic Theory”, Economic Journal, 49 (193), pp. 14-33.

Kaldor N. (1966), “Marginal Productivity and the Macro-Economic Theories of Distribution: Comment on Samuelsson and Modigliani”, Review of Economic Studies, 33 (4), pp. 309-319.

Kelly D.L., Kolstad C.D. and Mitchell G.T. (2005), “Adjustment Costs from Environmental Change”, Journal of Environmental Economics and Management, 50 (3), pp. 468-495.

Keynes J.M. (1976 [1930]), A Treatise on Money, vol. 1, New York: AMS Press.

Kronenberg T. (2010), “Finding Common Ground between Ecological Economics and Post Keynesian Economics”, Ecological Economics, 69 (7), pp. 1488-1494. Special Section: Ecosystem Services Valuation in China.

Lima G.T. (2004), “Endogenous Technological Innovation, Capital Accumulation and Distribution Dynamics”, Metroeconomica, 55 (4), pp. 386-408.

Massarani L. (2015), “Brazil Mine Disaster Floods Area with Toxic Substances”, Scientific American, 25 November, available at: https://www.scientificamerican.com/article/brazil-mine-disaster-floods-area-with-toxic-substances/

Nakatani T. and Skott P. (2007), “Japanese Growth and Stagnation: A Keynesian Perspective”, Structural Change and Economic Dynamics, 18 (3), pp. 306-332.

Oliveira G. and Lima G.T. (2015), “A Green Lewis Development Model”, FEA-USP Working Paper, no. 2015-49, São Paulo (BR): Department of Economics, University of São Paulo, available at: http://www.repec.eae.fea.usp.br/documentos/Oliveira_Lima_49WP.pdf

Ostrom E. (1990), Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge (UK): Cambridge University Press.

Ostrom E., Gardner R. and Walker J. (1994), Rules, Games and Common Pool Resources, Ann Arbor (MI): The University of Michigan Press.

Pearce D. and Turner R. (1990), Economics of Natural Resources and the Environment, Baltimore (MD): Johns Hopkins University Press.

Perman R. (2003), Natural Resource and Environmental Economics, Harlow (UK): Pearson Education.

Razmi A. (2016), “North-South Interactions in the Presence of Trade in Environmental Permits: A Structuralist Investigation”, Cambridge Journal of Economics, 40 (2), pp. 541-574.

Roncaglia A. (2003), “Energy and Market Power: An Alternative Approach to the Economics of Oil”, Journal of Post Keynesian Economics, 25 (4), pp. 641-659.

Schefold B. (1997), “Ecological Problems as a Challenge to Classical and Keynesian Economics”, in Normal Prices, Technical Change and Accumulation (pp. 525-549), London: Palgrave Macmillan.

Skott P. (1989a), Conflict and Effective Demand in Economic Growth, Cambridge (UK): Cambridge University Press.

Skott P. (1989b), “Effective demand, class struggle and cyclical growth”, International Economic Review, 30 (1), pp. 231-247.

Skott P. (2010), “Growth, Instability and Cycles: Harrodian and Kaleckian Models of Accumulation and Income Distribution”, in Setterfield M. (ed.), Handbook of Alternative Theories of Economic Growth (pp. 108-131), Cheltenham (UK) and Northampton (MA): Edward Elgar.

Skott P. (2015), “Growth Cycles with or without Price Flexibility”, Review of Keynesian Economics, 3 (3), pp. 374-386.

Steindl J. (1952), Maturity and Stagnation in American Capitalism, London: Monthly Review Press.

Stern D.I. (2004), “The Rise and Fall of the Environmental Kuznets Curve”, World Development, 32 (8), pp. 1419-1439.

Stern D.I. (2015), “The Environmental Kuznets Curve after 25 Years”, CCEP Working Papers, no. 1514, Canberra: Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.

Stokey N.L. (1998), “Are There Limits to Growth?”, International Economic Review, 39 (1), pp. 1-31.

Tanaka S. (2015), “Environmental Regulations on Air Pollution in China and Their Impact on Infant Mortality”, Journal of Health Economics, 42, pp. 90-103.

Taylor L., Rezai A. and Foley D.K. (2016), “An Integrated Approach to Climate Change, Income Distribution, Employment, and Economic Growth”, Ecological Economics, 121 (Jan), pp. 196-205.

Downloads

Published

2018-07-10

How to Cite

de Oliveira, G. (2018). Environment, Effective Demand, and Cyclical Growth in Surplus Labor Economies. PSL Quarterly Review, 71(285), 183–201. https://doi.org/10.13133/2037-3643_71.285_5