Multidimensional trade and Ramsey effects: Sustainable growth versus volatility

Authored by Kcodgoh Laurents Edgeweblime

Date Published: 2019

DOI: 10.1016/j.jclepro.2019.03.318

Sponsors: No sponsors listed

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Model Documentation: Other Narrative Mathematical description

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Abstract

In this paper, the following research question is answered: How can the potential impact of the optimal policies of externalities trade to uncouple growth and volatility in order to generate sustainable growth and clean production be explored by the means of Agent-based modeling (ABM)? At this end, I attempt, to generalize the trade of everything to realize the steady state. By considering any human action as causing positive or negative externalities, the intergenerational and international generalized trades become possible. Only this generalized trade conform to the complex hypotheses of the neoclassical model whose operationalisation immediately leads to the steady state, foundation of a sustainable economy, without fluctuations and without destruction of the environment and where all the productions are clean. I find, generations import from other generations productive factors intensively used in the production of goods and services highly consumed in the current generations and export productive factors intensively used in the production of goods and services weakly consumed in the same generations. Indirectly, generations import goods and services that use a high proportion of technically scarce productive factors and a low proportion of technically abundant productive factors and export goods and services that use the reverse proportions of the same productive factors. Thus, positive externalities (unnatural resources) are exchanged against negative externalities (overconsumption of natural resources). A productive factor is technically scarce in a generation if the part of this productive factor imparted to this generation is insufficient to produce as much of these goods and services that it wishes to consume. A productive factor is technically abundant if its proportion existing in this generation is superior to its production needs. Under these conditions, I show, at the equilibrium level, each productive factor and each good or service has the same price in each generation. This realizes an efficient trade of externalities decoupling thus growth and volatility. That is why I conclude the policies to uncouple growth and volatility are also those of sustainable growth and clean production, ensuring to each generation an equivalent use of natural and unnatural resources. In contrast to AK model, I find, through widened evidence that, a greater willingness to hoard or an improvement in the level of technology shows up in the long run that higher levels of capital (unnatural resources) and output per effective worker are achieved, with no change in per capita growth rate. The steady state results in diminishing returns to inputs in the technology production. At this end, I propose, countries or generations with a high price deviation should pay to the World Environmental Bank (WEB) a tax that would be proportional to its price deviation or its growth volatility path. (C) 2019 Elsevier Ltd. All rights reserved.

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