Abstract. Population growth is often viewed as a most oppressive global problem with
respect to environmental deterioration, but the relationships between population development,
economic dynamics and environmental pollution are complex due to various
feedback mechanisms. We analyze society’s economic decisions on birth rates, investment
into human and physical capital, and polluting emissions within an optimal control
model of the coupled demographic-economic-environmental system.
We show that a long-run steady state is optimal that is characterized by a stable
pollution stock, and by population and economic growth rates depending on the possibilities
of emission abatement and technical progress due to human capital accumulation.
We derive a condition on the production technologies and opportunity costs of raising
children, under which the optimal birth rate is constant even during the transition to a
steady state. In particular in an economy where only human capital is needed to produce
output, the optimal choice of the birth rate is not affected by the states of the economy or
the environment. In such a setting, the optimal birth rate is constant and policy should
concentrate on intertemporal adjustment of per-capita emissions.