Economic growth and the environment: Theory and facts

Sherry Bartz, David Kelly

Research output: Contribution to journalArticle

36 Citations (Scopus)

Abstract

Several recent papers propose competing theoretical explanations for the empirical observation of an inverted U-shape relationship between environmental degradation and per-capita income. We propose the following test of the theory: calibrate a theoretical model to an already developed economy using information unrelated to the pollution-income curve. Then simulate the model starting from a less developed initial condition and compare the predicted pollution-income relationship with that in the data. Our results are mixed. Some support exists for the theory that the inverted U-shape results from a corner solution in which less developed countries do not abate pollution. However, because we find abatement is relatively inexpensive, the model predicts pollution peaks at a level of per capita income much lower than that observed in our U.S. data. For some pollutants, we find evidence of a structural break in preferences in the early 1970s. When the structural break is added, the model performs better for two of three pollutants.

Original languageEnglish (US)
Pages (from-to)115-149
Number of pages35
JournalResource and Energy Economics
Volume30
Issue number2
DOIs
StatePublished - May 1 2008

Fingerprint

Pollution
Economic growth
Income
Inverted-U
Per capita income
Structural breaks
Initial conditions
Environmental degradation
Information economy
Corner solutions
Abatement
Less developed countries

Keywords

  • Calibration
  • Environmental Kuznets curve
  • Growth environment

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Economic growth and the environment : Theory and facts. / Bartz, Sherry; Kelly, David.

In: Resource and Energy Economics, Vol. 30, No. 2, 01.05.2008, p. 115-149.

Research output: Contribution to journalArticle

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