Total factor productivity and the Environmental Kuznets Curve: A comment and some intuition

Abstract

Chimeli and Braden [Chimeli, Ariaster B., Braden, John B., 2005. Total factor productivity and the Environmental Kuznets Curve. Journal of Environmental Economics and Management 49, 366–380] derive a necessary and sufficient condition under which inter-country differences in total factor productivity can yield an Environmental Kuznets Curve. They argue that their results emphasize the importance of differences in total factor productivity across countries as well as the need for decreasing returns to scale in pollution-abating technologies for the existence of an Environmental Kuznets Curve. We show that their Proposition 1 is equivalent to Proposition 2 in Lieb [Lieb, Christoph M., 2002. The Environmental Kuznets Curve and satiation: a simple static model. Environment and Development Economics 7, 429–448]. This implies that, even in Chimeli and Braden's model, contemporaneous changes in the marginal rate of substitution between environmental quality and consumption on the demand side and the marginal rate of transformation between these goods on the supply side drive the pollution–income relationship. This is a very general condition that does not rely on either differences in total factor productivity or decreasing returns to scale in abatement, and which is widely applicable.