Economic growth and the environment - Environmental Management - page 381

Risk Intelligence (BERI), a private international investment risk service.
The indicators were bureaucratic delays, enforceability of contracts,
nationalization potential and infrastructure quality.
Tuan tested four hypotheses. The i rst was the existence of an inverted
U-shaped relationship between per capita income and CO 2 emissions.
The second was the impact of the rate of economic growth on the EKC
trajectory. The third was the impact of population density on EKC. He
hypothesized that the higher the population density, the lower the turning
point of the EKC, and hence, a better environmental quality. The fourth
hypothesis was the role of institutions and policies in determining the
EKC path. Again, he hypothesized that ef ective policies and institutions
would lower the EKC turning point, and therefore would improve the
environment along with economic growth. Tuan found an EKC relation-
ship between per capita income and CO 2 emissions with a turning point
of approximately $18 000. With respect to the impact of economic growth
and population rate on CO 2 emissions, the author found that their impact
varied according to the level of income and the country's stage of develop-
ment. The author's main conclusion was that the quality of policies and
institutions played an important role in smoothing out the EKC, however,
the payof s were not the same for developing and developed countries. He
noted that a good institutional capacity and sound environmental policies
could, to a large extent, contribute to a better environment.
Similar results were also found in a study by Bhattarai and Hammig
(2001) for deforestation. They studied the relationship between income
and deforestation in 21 countries in Latin America for the period 1972
to 1995. They used data from various sources, such as the FAO, WRI
and the UNEP. They also used the Penn World Table from Summers
and Heston (1991) for the national income data, exchange rates and
trade, the Freedom House Tables and Knack and Keefer (1995) for the
index measures for sociopolitical institutions and the World Development
Report (1998) for other variables. The per capita GDP data were adjusted
1998 US dollars PPP. Their i ndings coni rmed the existence of an EKC
in Latin America with turning point around $6800. They concluded that
(1) macroeconomic factors, such as indebtedness, inl ation and exchange
rate policies would shift the intercept of the EKC and (2) the present level
of deforestation in Latin America would be reduced by strengthening the
sociopolitical institutions in the region.
A number of studies examined the relationship between economic
growth and the environment across dif erent political systems. Torras and
Boyce (1998) investigated the causal linkages between changes in income
and pollution levels. They hypothesized that more equitable distribution
of power was an essential link for the improvement of some air and water