The Environmental Kuznets Curve: Seeking Empirical Regularity and Theoretical Structure

Abstract

In the early 1990s the attention of economists was captured by empirical evidence suggesting that rising income levels in developing countries could be good rather than bad for the environment. This evidence drove a stake into the heart of those opposing growth on environmental grounds. Ultimately, the view that income growth by itself eventually will be good for the environment also appears to be wrong because a causal relationship between income and environmental quality cannot be demonstrated. The original empirical estimates appear fragile at best compared to estimates using more representative datasets, higher-quality data, and more appropriate econometric techniques. More plausible explanations for the observed data revolve around good government, effective regulation, and diffusion of technological change. These factors tend to be related in a diffuse manner with higher income and suggest it is likely, but not inevitable, that a society will choose to reduce pollution levels as it becomes wealthier.