Growth, wealth accumulation and environmental change in portfolio choice and trade

Abstract

The main purpose of this paper is to study global economic growth against national capital accumulation and environmental change in conditions of free international trade. The paper addresses issues related to changes in inequalities of income, wealth and economic structures between countries. Another unique contribution is to include portfolio equilibrium along with physical wealth and other assets (such as gold and diamond) in the multi-country growth model. We develop a multi-country model of wealth and environment as endogenous variables, along with government intervention in environmental protection. Governments collect taxes from different sources of producers’ outputs and consumers’ income. We apply Zhang’s alternative concept of disposable income and utility function to model behaviour of households. We build the dynamics of J-country world economy, the behaviour of which is described by differential equations. We simulate the movement of the 3-country global economy and carry out comparative dynamic analysis with regard to certain parameters.