This paper established a two-sector model of the agricultural and industrial sectors in an endogenous growth model framework to analyze the effects of environmental subsidies for the fallow policy on economic growth and environmental protection. The results improve the subsidy rate of the fallow policy may result in environmental protection and economic growth are favorable, but may also result in a favorable environmental protection, but unfavorable economic growth. This is because the rewards of agricultural land fallow the allocation of labor will change. If the industrial sector to invest more labor and increase production, it will lead to the accumulation of capital increase and promote economic growth, the agricultural sector to invest more labor, it will cause the deterioration of the economic growth.
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