Endogenous growth and negative externalities

We augment an AK model by treating the units of time devoted to work as a choice variable and by introducing an environmental resource entering the households' utility function. In general, the resulting model does not generate endogenous growth in the absence of negative externalities: perpetual growth can be generated only when the resource deteriorates because of consumer activities. In this case, the households keep their labor supply and saving rates relatively high in spite of their increasing private wealth in order to consume more private goods as substitutes for the declining quality of the environment.