Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331465 
Authors: 
Year of Publication: 
2025
Series/Report no.: 
ISER Discussion Paper No. 1286
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
This study incorporates two heterogeneous industries into an endogenous growth model within the framework of a circular economy. In the model, industries are classified as either brown or green, and each can transition between states through R&D activities related to innovation and greening. Greening R&D is conducted exclusively by firms in the brown industry and enables the transition to the green industry. We analyze the effects of subsidies for greening R&D and show that such subsidies increases labor allocation to both innovation and greening R&D. As a result, the model yields win-win outcome: economic growth is promoted not only by productivity-driven growth acceleration but also by a decline in the share of brown industries that rely on exhaustible resources, which mitigates the negative impact of resource depletion on growth. These findings suggest that advancing a circular economy can be compatible with sustained economic growth.
Subjects: 
Endogenous growth
Circular economy
Recycling
Heterogeneous-industry model
JEL: 
O31
O44
Q53
Document Type: 
Working Paper

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