Environmental income in economic growth of a large open economy for the era of eco-urbanization

Abstract

Purpose The purpose of this paper is to show that the environmental income drives economic growth of a large open country. Design/methodology/approach The authors detect that the relative environmental income has double effect of “conspicuous consumption” on the international renewable resource stock changes when a new social norm shapes to environmental-friendly behaviors by using normal macroeconomic approaches. Findings Every unit of extra demand for renewable resource consumption increases the net premium of domestic capital asset. Even if the technology spillovers are inefficient to the substitution of capital to labor force in a real business cycle, the relative income with scale effect increases drives savings to investment. In this case, the renewable resource consumption promotes both the reproduction to a higher level and saving the potential cost of environmental improvement. Even if without scale effects, the loss of technology inefficient can be compensated by net positive consumption externality for economic growth in a sustainable manner. Research limitations/implications It implies how to earn the environment income determines the future pathway of China’s rural conversion to the era of eco-urbanization. Originality/value We test the tax incidence to demonstrate an experimental taxation for environmental improvement ultimately burdens on international consumption side.