Sustainability and growth when manufactured capital and natural capital are not substitutable

A two-sector neoclassical growth model of manufactured capital and natural capital is used in examining the importance of factor substitution to the issues of sustainability and economic growth. Analytical conclusions are established on the sustainability of the stocks of natural capital and manufactured capital, as well as on the importance of factor substitution to the issues of technical progress and recycling. Policy and welfare implications of the analysis are also discussed.