NATURAL CAPITAL INVESTMENT STRATEGIES AND ECONOMIC GROWTH: AN EXTENDED ECONOMIC GROWTH ANALYSIS MODEL

Abstract

The main focus of this study is to determine suitable strategies for investing in natural capital to ensure steady economic growth. In this research, we categorize natural capital into three main areas: investment in energy and mineral resources development, investment in non-energy and mineral resources development and investment in the protection of natural resources. Subsequently, these three types of investment strategies are integrated into economic growth models, and we construct extended economic growth models that consider both exogenous and endogenous natural resources investment rates. Theoretical models indicate that in order to maintain stable economic growth, the growth rates of the three types of investments should be aligned. Furthermore, the optimal balanced growth rate of natural capital investment is influenced not only by the output elasticity of each input factor and the time discount rate, but also by the production efficiency of the research and development (R&D) sector, as well as the level of human capital invested in the R&D sector. These findings are in line with empirical evidence. Lastly, based on our research, we provide recommendations to maximize the overall potential of the local economy, society and environment. These recommendations aim to optimize the utilization of natural capital, leading to sustainable economic development.