Economic Growth & the Environment

Nation becomes richer

• Richer nation will use more resources, demand more energy, and produce more waste

• Richer nation can afford to invest in cleaner technology

Normal Good

• Generally think of environmental quality as a certain good because people want to purchase more of it as their income increases

• Goods for which demand increases as consumer income increases, and vice versa.

Environmental Kuznets Curve (EKC)

The theory that a country’s environmental impacts increase in the early stages of economic development but eventually decrease above a certain level of income

EKC Theory & Data

• EKC is not found for all pollutant data (does not match data for CO₂ )

• IF EKC exists, economic growth might be a solution to envirnomental degradation

The Green Solow Model

A theoretical model to explain the EKC. It modifies the standard Solow growth model that forms the basis of all research in economic growth.