Abstract
We develop a stock externality model in an optimal growth framework and examine the relationship between economic growth and the environment. We find that as incomes rise over the growth path, both the marginal benefits of pollution control and the marginal costs of pollution control rise. If at a given income level the marginal benefits rise more than the marginal costs, the emissions-income relationship has a negative slope at that income level and vice versa. We are thus able to generate examples of emissions-income relationships of varying shapes by varying pollution specific parameters which determine marginal costs and benefits, such as the convexity of the cost function, the rate of decay of the stock of pollution, and the share of consumption in the composite good. An inverted U-shape relationship (an "environmental Kuznets curve") requires only minimal assumptions. A convex cost function and that environmental quality a normal good imply an inverted U-shape relationship for an open set of parameters. We also examine how environment-income relationship varies according to what measure is used for the environment (emissions, stock of pollution, or emissions control).
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1367-1390 |
| Number of pages | 24 |
| Journal | Journal of Economic Dynamics and Control |
| Volume | 27 |
| Issue number | 8 |
| DOIs | |
| State | Published - Jun 1 2003 |
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Keywords
- Environmental Kuznets curves
- Growth
- Pollution
- Stock externalities
ASJC Scopus subject areas
- Economics and Econometrics
- Control and Optimization
Cite this
On environmental Kuznets curves arising from stock externalities. / Kelly, David.
In: Journal of Economic Dynamics and Control, Vol. 27, No. 8, 01.06.2003, p. 1367-1390.Research output: Contribution to journal › Review article
}
TY - JOUR
T1 - On environmental Kuznets curves arising from stock externalities
AU - Kelly, David
PY - 2003/6/1
Y1 - 2003/6/1
N2 - We develop a stock externality model in an optimal growth framework and examine the relationship between economic growth and the environment. We find that as incomes rise over the growth path, both the marginal benefits of pollution control and the marginal costs of pollution control rise. If at a given income level the marginal benefits rise more than the marginal costs, the emissions-income relationship has a negative slope at that income level and vice versa. We are thus able to generate examples of emissions-income relationships of varying shapes by varying pollution specific parameters which determine marginal costs and benefits, such as the convexity of the cost function, the rate of decay of the stock of pollution, and the share of consumption in the composite good. An inverted U-shape relationship (an "environmental Kuznets curve") requires only minimal assumptions. A convex cost function and that environmental quality a normal good imply an inverted U-shape relationship for an open set of parameters. We also examine how environment-income relationship varies according to what measure is used for the environment (emissions, stock of pollution, or emissions control).
AB - We develop a stock externality model in an optimal growth framework and examine the relationship between economic growth and the environment. We find that as incomes rise over the growth path, both the marginal benefits of pollution control and the marginal costs of pollution control rise. If at a given income level the marginal benefits rise more than the marginal costs, the emissions-income relationship has a negative slope at that income level and vice versa. We are thus able to generate examples of emissions-income relationships of varying shapes by varying pollution specific parameters which determine marginal costs and benefits, such as the convexity of the cost function, the rate of decay of the stock of pollution, and the share of consumption in the composite good. An inverted U-shape relationship (an "environmental Kuznets curve") requires only minimal assumptions. A convex cost function and that environmental quality a normal good imply an inverted U-shape relationship for an open set of parameters. We also examine how environment-income relationship varies according to what measure is used for the environment (emissions, stock of pollution, or emissions control).
KW - Environmental Kuznets curves
KW - Growth
KW - Pollution
KW - Stock externalities
UR - http://www.scopus.com/inward/record.url?scp=0037410187&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0037410187&partnerID=8YFLogxK
U2 - 10.1016/S0165-1889(02)00063-5
DO - 10.1016/S0165-1889(02)00063-5
M3 - Review article
AN - SCOPUS:0037410187
VL - 27
SP - 1367
EP - 1390
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
SN - 0165-1889
IS - 8
ER -