This chapter presents an extension of the model analyzed in Chapter 4. The model is studied assuming that production leads to emissions that build up a stock of pollution that negatively affects utility. It focuses on the question of whether ongoing growth is feasible with a constant or even declining stock of pollution, and both growth effects in the long run are derived based on four different scenarios: a scenario with a constant stock of pollution; a scenario with an improving environmental quality; a scenario in which environmental pollution grows at the same positive rate as all other endogenous variables; and a scenario in which environmental pollution grows at the same positive rate as all other endogenous variables.
Keywords: economic model, hosehold sector productive sector, pollution, government, balanced growth rate,