Endogenous Growth of Population and Income Depending on Resource and Knowledge

We consider a three sector demoeconomic model and its interdependence with the accumulation of human capital and resources. The primary sector harvests a renewable resource which constitutes the input into industrial production, the secondary sector of our economy. Both sectors are always affected by the stock of knowledge. The tertiary sector is responsible for the accumulation of this stock that represents a public good for all three sectors. Labour is divided up between the three sectors under the assumption of competitive labour markets. The economy exhibits two externalities—free access to renewable resource harvesting and the existence of a public stock of knowledge—that are not properly reflected in competitive markets. We internalize these externalities by taxing the output of the primary sector and use these taxes together with taxes on labour income to finance the inputs of the tertiary sector. The central focus of this study is whether and what kind of interactions between the economy, the population and the environment foster sustainability and if possible, continuous growth. The views expressed in this paper are the first author’s own views and do not necessarily represent those of the Max Planck Institute for Demographic Research.