Optimal growth and land preservation

Abstract

A model of optimal economic growth with a constant population subject to a constraint on the availability of land is presented. It takes account of the dual character of land as a production factor and as a consumption good (environmental amenities) by determining the optimal intertemporal allocation ofland between productive and recreational uses. An extension of the analysis for the case of a growing population with endogeneous growth based on human capital accumulation shows that if the rate of discount is not very low then there exists a set of balanced growth paths compatible with a constant allocation ofland.