Economic Development, Population Dynamics, Environmental Change

This chapter studies interactions among different economic variables and government policies in modern economies. It builds a general economic growth model with endogenous population, wealth, and environment in a competitive economy with a microeconomic foundation. Wealth accumulation is built on the Solow growth model. Wealth accumulation and population change are modeled similarly as in the previous chapters. The paper is organized as follows. Section 8.1 defines the model with economic growth, population dynamics, and environmental change. Section 8.2 examines the dynamics of the system and its properties. Section 8.3 shows the impact of a rise in the propensity to have children on the system. Section 8.4 plots how the system is affected by a rise in human capital. Section 8.5 examines the effects of a change in the consumption tax. Section 8.6 studies how a rise in the tax rate on income from interest on wealth affects the path of development. Section 8.7 studies how the system is affected by a rise in the tax rate on the production sector’s output. Section 8.8 shows how the system is affected when productivity is more strongly affected by the environment. Section 8.9 shows how a stronger impact of the environment on the mortality rate changes the motion of the system.