Environment Quality and Economic Convergence: Extending Environmental Kuznets Curve Hypothesis

This paper examines the link between environmental indicators and economic convergence for a large sample of rich and poor countries. While in economic literature income and environment are seen to have an inverted-U shaped relationship (Environment Kuznets Curve hypothesis), it is also well established that an improvement in environmental quality is positively related to economic activity. In the early stage of economic development, the gain from income growth could be cancelled or mitigated by environmental degradation through some channels and create a vicious circle in economic activity unlike in developed countries. This in turn could slow down economic convergence. We empirically assess this issue through an econometric model. We found that environmental degradation affects negatively economic activity and reduces the ability of poor countries to reach developed ones economically.