Most economic theory on long-run growth is organized around the concept of balanced growth. On a balanced growth path, all economic variables grow at constant but possibly different rates. The concept of balanced growth paths is usually motivated by the "stylized facts" of growth, which state...

An endogenous growth model, which links pollution to ineffective input-use, is developed to examine the potential for achieving balanced growth while preserving the environment through investment in conservation capital. We derive conditions under which individual preferences for environmental...