Industrial Pollution in Economic Development (Kuznets Revisited)

Abstract

Using new international data, the authors test for an inverse U-shaped, orKuznets,relationship between industrial water pollution and economic development. They measure the effect of income growth on three proximate determinants of pollution: the share of manufacturing in total output, the sectoral composition of manufacturing, and the intensity (per unit of output) of industrial pollution at theend of pipe.They find that the manufacturing share of output follows a Kuznets-type trajectory, but the other two determinants do not. Sectoral composition getscleanerthrough middle-income status and then stabilizes. At the end of the pipe, pollution intensity declines strongly with income. The authors attribute this partly to stricter regulation as income increases and partly to pollution-labor complementarity in production. When they combine the three relationships, they do not find a Kuznets relationship. Instead, total industrial water pollution rises rapidly through middle-income status and remains roughly constant thereafter. To explore the implications of their findings, the authors stimulate recent trends in industrial water pollution for industrial economies in the OECD (Organization for the Economic Cooperation and Development), the newly industrialized countries, Asian developing countries, and ex-COMECON (Poland and former Soviet Union) economies. They find roughly stable emissions in the OECD and ex-COMECON economies, moderate increases in the newly industrialized countries, and rapidly growing pollution in the Asian developing countries. Their estimates for the 1980s suggest that Asian developing countries displaced the OECD economies as the greatest generators of industrial water pollution. Generally, however, the negative feedback from economic development to pollution intensity was sufficient to hold total world pollution growth toabout 15 percent over the 12-year sample period.