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Environmental Kuznets Curve - Essay Example

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There has been widespread debate over the linkage between environmental quality and the effects of economic growth. As noted by (Shafik, 1994), empirical evidence was lacking to support either of the above two arguments…
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Environmental Kuznets Curve
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Download file to see previous pages On the other end of the continuum, economists advocate that progress in technology along with sustainability of natural resources would lead to little reliance on natural environmental resources; thus, economic growth ought to be there (Beckerman, 1992). As noted by (Shafik, 1994), empirical evidence was lacking to support either of the above two arguments. Furthermore, much difficulty was faced in operationally defining the dimensions of environmental quality. Although no single parameter can be used to define environmental quality, a combination of parameters has been developed for environmental deprivation in order to demonstrate the effect of economic growth on the quality of environment. Amongst one of the first studies conducted in this regard were those of the World Development Report. As shown in Appendix 1, some dimensions of environmental deprivation (including emissions of carbon dioxide and solid waste pollution) are highly correlated with income, meaning that they increase as income increases; in other words, in terms of these dimensions, economic growth has a negative effect on environment. Others (including lack of safe drinking water and sanitation facilities) tend to decrease as income increases, implying that economic growth can be used as an instrument for enhancing quality of environment. ...
Firstly, growth is demonstrated to have what is called a “scale impact” on environment; that is, the larger the size of economic activity the larger the rate of environmental degradation (Grossman, 1995). This is due to the fact that an increase in income is the product of increasing factor inputs and natural resources of which waste and environmental degradation is a by-product (Grossman, 1995). Secondly, the positive effect on environment of economic growth is what is known as the “composition effect”; that is, as income increases, structural economic changes tend to increase the proportion of environmentally friendly practices in the economy (Grossman, 1995). Thus, as per the combination of these two effects, environmental quality tends to go down due to structural economic changes in the economy that is in transition from rural to urban and from agricultural to a largely industrial structure but starts to improve as the economy undergoes a second structural change from heavy industrial processes to technology-intensive ones (Panayotou, 1993). Finally, the technological advancement that accompanies economic growth and the resulting increased expenditure on research and development leads to the adoption of cleaner, environmentally friendly technology which enhances the environmental quality. This is termed as the “technique effect” (Grossman, 1995). As the Environmental Kuznets Curve suggests, the inverted U relationship between quality of environment and economic growth implies that the harmful impact on environment ( as per the scale effect) is explicit during the early phases of growth but is ultimately offset by the positive effects of the other two effects ( composition and technique) in the later stages. It is here that the ...Download file to see next pagesRead More
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