Kuznets Curve Essay

Kuznets Curve Essay

The Environmental Kuznets Curve framework is a very intriguing theory on the relationship between economic growth and effects of environmental quality. Essentially the theory proposes that initially, as economies grow, environmental quality is adversely affected with the marginal rate of this effect decreasing over time. This means the adverse impact on environmental quality will increase up to a point, at which continued economic growth would start to be beneficial for environmental quality. Empirical evidence of this theory has shown mixed results. In some places signs of this effect are evident, that is economic growth has fueled environmental quality gains. In other places the theory breaks down completely. Why does EKC make sense in the first place, and why does it fail in some instances?

Environmental quality doesn’t come cheap. Think about it. Consider a manufacturer of some good, which produces a toxic byproduct. The manufacturer cannot hold onto this byproduct forever, so it must dispose of it somehow. It can either choose to dispose of the toxins properly through a recycling plant or dump the chemicals in the local river. This was the case for many industries in the United States pre 1970’s environmental regulations. Since the 1950’s, infrastructural development such as interstate highways have made transporting said byproducts cheaper, technology advancements have made recycling and reducing emissions cheaper, and the ability to monitor and regulate industries which pollute have become more efficient. All these advancements have driven down the costs of pollution abatement, but even if the monetary costs were near zero to abate pollution, it is no guarantee industries would abate without government regulation.

Developing countries don’t have any of these luxuries. Some don’t have a functional government at all. In such countries it is inevitable if not necessary that economic growth will lead to adverse environmental effects. Inevitable in the fact the lack of government intervention will lead to no disincentive to stop polluting. Necessary because keeping costs down is sometimes the only way to remain competitive in a global market, the same reason why sweatshops flourish in developing nations. In other countries with sufficient governments such as Mexico, economic growth has not led to better environmental quality because of a lack of government intervention.

Economic growth will not produce better environmental quality on its own. Although, it is more likely to see better environmental quality in wealthier nations than in developing ones. The EKC framework will see positive correlations between countries which have become wealthy and increases in environmental quality in a lot of instances, but in no way should it be used as a model of predicting future environmental quality changes.

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