A Two-Sector Model of Economic Growth with Endogenous Technical Change and Pollution Abatement

  • Jean-Pierre Amigues
  • Tunç DurmazEmail author


We provide insights into the relationships between technological development, economic growth, and pollution accumulation using a two-sector model of economic growth with endogenous technical change. In the model, output is produced using a polluting resource. Production can be used for either consumption or abatement of pollution. Scientists can be allocated between two research activities: resource-saving and abatement-augmenting technologies. Our results indicate conditional path dependency. Specifically, when the innovative capacity in the resource-saving research sector is sufficiently high, scientists are allocated to improve only the resource-saving technology, independently of the state of the technologies and environment. Consequently, the allocation of researchers is path-independent. When the innovative capacity in the abatement-augmenting research sector is sufficiently high, the optimal allocation of researchers depends on the initial level of the pollution stock or technologies but eventually will be directed to improve the abatement technology. We further characterize the optimal steady-state and off-steady-state dynamics and show that green growth is always socially optimal. By using a two-sector model, we address a lack of attention to multi-sector growth models in neoclassical growth theory and show that distinct results and transitional dynamics can emerge.


Green growth Endogenous technical change Path dependency Environmental Kuznets curve Clean backstop Climate change 



We would like to thank Burak Ünveren, Cees Withagen, Fred Schroyen, Gunnar Eskeland, Linda Nøstbakken, Snorre Kverndok, Tetsu Haruyama, Eric Bond, Prudence Dato, Tuna Dinç, Can Askan Mavi, and two anonymous referees for many useful and constructive discussions on this topic, and Rögnvaldur Hannesson, Leif Sandal, and Sophie Lian Zhou for their detailed comments. We have also benefited from the comments and suggestions of the participants at the EAERE 22nd Annual Conference, Rokko Forum, the Bergen Economics of Energy and Environment Research Conference, and the Joint UiB-NHH PhD Workshop.

Funding Information

This work received financial support from the Center for Sustainable Energy Studies (CenSES).


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Authors and Affiliations

  1. 1.Toulouse School of EconomicsToulouseFrance
  2. 2.Department of EconomicsYildiz Technical UniversityIstanbulTurkey

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