From Green GDP to Green Growth – Stylized Macroeconomic Modelling

The concept of green growth, i.e. economic growth that reflects environmental objectives, is not so obscure and unfamiliar. Green growth logic is based on making growth process resource efficient, cleaner and more resilient without necessarily slowing them. However, when we try to put it in the standard growth framework we come across many theoretical dwells and pragmatic questions. On the other hand, growth theory may provide many insights into the mechanism and features of economic growth, but cannot render insights into the magnitude of effects without being systematically confronted with latent real time data. Considering traditional economic growth theories that identify sources of economic growth, which are paralysed with assumptions about substitution, rate on returns and technical change, it is not easy to evaluate direct or indirect contributions of environmental protection to economic growth, and vice versa. Yet, growth theory may be able say something about green growth if it can reveal the hidden bond between Green GDP and traditional sources of growth such as capital accumulation and labour productivity. This research provides stylized representations of growth with environmental prism as to evaluate the pattern, as well as the dynamics of economic growth. The purpose of the paper is to assess the green growth perspective by confronting conventional factors of growth, such as capital and human stock with two different representations of the Green GDP measure. Research logic is built on a panel cointegration approach that utilizes annual data for the EU28 countries. Empirical evidence suggests that Green GDP growth models provide results that are consistent with general features of standard economic growth models, however, with an ambiguous reach of human capital variable, that in fact limits the growth possibilities.