Optimal Growth, Coordination and Sustainability in the Spatial Economy

Until recently, the interaction between environmental quality, economic activity and growth is predominantly considered in an a-spatial context. Traditional neoclassical growth theor y following Solow/Swan has mainly addressed questions about environmental and resourc e limits to growth. Recently, much attention is also devoted to the environment-growth interface from an endogenous growth perspective. However, an important element that is missing i n both the neoclassical and endogenous growth approaches is a multiregional perspective. Th e present theoretical study tries to present one of the first attempts to fill this gap. The analysi s is based on a model of two interactive regions, with possible interaction between the regiona l environments via the global environment. The implications of this type of analysis ar e manifold. One is that endogeneity of growth is not only due to technology and knowledg e formation but also to the effects of trade, resource scarcity and environmental degradation . Another implication is that a coordinated environmental policy of regions should addres s long-term sustainability, and take account of the positive technological and negativ e environmental dynamic externalities.