On the Optimal Control of Pollution in a Human Capital Growth Model

On the one hand, the adoption of polluting technologies can enhance the factor productivity; on the other hand, pollution lowers the stock of human capital by weakening physical and mental performances, and shortening the life expectancy at the end. To capture the impact of pollution on economic growth, we compute the optimal policy in a continuous-time endogenous growth model a la Lucas (1988). The concavity properties we consider, not only ensure the uniqueness of solution but also play a fundamental role in comparative statics and local dynamics.