Environmental Engineering Reference
In-Depth Information
in turn, stimulates policy responses to improve the environmental quality.
The argument here is that, at low levels of income, the impact of economic
growth is within the carrying capacity of the biosphere. As income rises,
the environmental constraints tighten, and therefore induce regulation
and policy responses to reduce environmental degradation (Arrow et al.,
1995).
Basic studies of Environmental Kuznets Curve
The relationship between economic development and environmental
quality is a recent controversial debate, which started at the beginning of
the 1990s. It centres around the hypothesis that there is an empirical rela-
tionship between income per capita and environmental quality in terms
of pollution or resource depletion. There have been several observations
by a number of economists and ecologists that, as income increases, envi-
ronmental degradation increases up to a point, after which environmental
quality improves. In other words, the relationship has an 'inverted-U'
shape. This relationship is referred to as the 'Environmental Kuznets
Curve'.
The name of the relationship is derived from the similarity of the curve
to the relationship between income inequality and income growth in the
income distribution theory by Simon Kuznets in 1955, and which is termed
the 'Kuznets Curve'. Given the obvious analogy, the bell-shaped relation-
ship between per capita income and pollution is named the Environmental
Kuznets Curve (EKC, hereafter).
Empirical literature on the EKC goes back to a paper prepared by
Grossman and Krueger (1991) for a conference on the US-Mexico Free
Trade Agreement. In this paper, which was later published in 1993,
Grossman and Krueger investigated the implications of economic growth
as a result of the North American Free Trade Agreement (NAFTA) on
environmental degradation as there were claims that the agreement might
increase environmental degradation. They studied the ef ect of reduction
in trade barriers on the environment in Mexico and assessed the relative
magnitudes of change in the level of pollution resulting from further trade
liberalization of three ef ects: expanding the scale of economic activity,
altering the composition of economic activity and changing the produc-
tion techniques. They carried out their study using a cross-country panel
of data on urban air pollution in two or three locations in each group of
cities in 42 countries from 1977 to 1988. The three pollutants were sus-
pended particulate matter (SPM), SO
2
and dark matter (smoke). The data
were taken from the Global Environmental Monitoring System (GEMS)
published by the World Health Organization (WHO). The income data
used were real per capita GDP measured in 1985 US PPP from Summers
