ECONOMIC GROWTH AND THE QUALITY OF THE ENVIRONMENT: TAKING STOCK

There is a long-standing debate on the relationship between economic development and environmental quality. From a sustainable development viewpoint there has been a growing concern that the economic expansion of the world economy will cause irreparable damage to our planet. In the last few years several studies have appeared dealing with the relationship between the scale of economic activity and the level of pollution. In particular, if we concentrate on local pollutants many empirical contributions have identified a bell-shaped curve linking per capita pollution to per capita GDP (in the case of global pollutants like CO₂ the evidence is less clear-cut). This behavior implies that, starting from low per capita income levels, per capita emissions or concentrations tend to increase but at a slower pace. After a certain level of income (which typically differs across pollutants) – the “turning point” – pollution starts to decline as income further increases. In analogy with the historical relationship between income distribution and income growth, the inverted-U relationship between per capita income and pollution has been termed “Environmental Kuznets Curve”. The purpose of this paper is not to provide an overview the literature: there are several survey papers around doing precisely that. We instead reconsider the explanations that have been put forth for its inverted-U pattern. We consider the literature from this perspective. In addition, without resorting to any econometric estimation, we consider whether simple data analysis can help to shed some light on the motives that can rationalize the Environmental Kuznets Curve. This paper is part of the research work being carried out by the Climate Change Modelling and Policy Unit at Fondazione Eni Enrico Mattei and has been prepared for the 2004–2005 ESRI Collaboration Project. The author is grateful to Nicola Cantore for skillful assistance.