Sustainability traps: patience and innovation

Christos Karydas () and Evangelos Dioikitopoulos
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Christos Karydas: Center of Economic Research (CER-ETH), ETH Zurich, Switzerland

No 20/330, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: This paper argues that the joint relation between long-term orientation, environmental quality and innovation plays a key role in explaining environment-poverty traps. Based on empirical observations, we allow for the subjective discount rate to negatively depend on environmental quality in an R&D-driven endogenous growth model with local pollution externalities. Our model reconciles two empirical facts: i) multiple equilibria of economic and environmental development; ii) opposite responses to technological improvements depending on the initial equilibrium. Our results suggest that -- in addition to traditional policies such as development aid and technology transfer -- policies that aim at improving both the economic and the environmental dimension of sustainability, should also focus on changing individuals' long-term views in countries that face weak environmental conditions.

Keywords: Endogenous growth; innovation; time preference; environmental poverty traps; economic poverty traps (search for similar items in EconPapers)
JEL-codes: D90 E21 O13 O44 Q55 Q56 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2020-01
New Economics Papers: this item is included in nep-cse, nep-env, nep-gro, nep-ino, nep-mac, nep-sbm and nep-tid
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