Stochastic Environmental Effects, Demographic Variation, And Economic Growth

The authors consider a stochastic environment to study interactions among pollution growth, demographic changes, and economic growth. Drawing on the empirical findings of slow convergence patterns of pollution shocks (viz., with a long-memory); they build an analytical framework where stochastic environmental feedback effects on population changes are reflected upon aggregate economic growth. Long-memory in economic growth, in the model, is shown to arise due to the inherent stochasticity in environmental and demographic system. Empirical results for a set of developed and developing countries generally support the conjecture. Simulation experiment is carried out to lend additional support to this claim.