What does sustainable development mean ? There are many definitions of sustainable development, but they are often incompatible. At the risk of oversimplification, we can distinguish two broad ideological groups in environmentalism. One group pursues expansion of consumption for economic growth, and the other group tries to limit consumption for conservation of the environment. The result is no change. That is why sustainable development is unable to progress.
The purpose of this paper is to determine the goal of sustainable development while focusing on GDP growth. Therefore, we consider policies for sustainable development with a simple dynamic two region economy model and the extended framework of Krugman (1981) to add renewable resources as a factor of manufacturing production.
The Krugman model portrays a two-region world in which the industrial sectors of the regions grow through the accumulation of capital. However, a crucial assumption is that there are external economies in the industrial sector. The Krugman model shows that ‘uneven development' is a necessary outcome in such a model because an initial discrepancy in capital-labor ratios between the two regions cumulates over time and leads to a division of the world into a capital-rich industrial region and capital-poor agricultural region.
In this paper we assume that natural resources are essential for manufactured production. Then we analyze a dynamic growth model of a two region growth model to determine the conditions of sustainable development. The dynamic growth model shows three key conditions for sustainable development: (1) abundant renewable resources in a country, (2) an elastic resource price of the resources and (3) restrictions in the trade of renewable resources between rich countries and poor countries.
JEL Classification: Q20, Q27, O56
