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Household Production and Environmental Kuznets Curves – Examining the Desirability and Feasibility of Substitution

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  • Alexander Pfaff

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  • Shubham Chaudhuri
  • Howard Nye
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    Abstract

    This paper provides a theoretical explanation for the widely debatedempirical finding of “Environmental Kuznets Curves”, i.e., U-shaped relationships between per-capita income and indicators of environmentalquality. We present a household-production model in which the degradationof environmental quality is a by-product of household activities. Householdscan not directly purchase environmental quality, but can reduce degradation by substituting more expensive cleaner inputs to production for less costlydirty inputs. If environmental quality is a normal good, one expectssubstitution towards the less polluting inputs, so that increases in incomewill increase the quality of the environment. It is shown that this onlyholds for middle income households. Poorer households spend all income on dirty inputs. When they buy more, as income rises, the pollution also rises.they do not want to substitute, as this would reduce consumption ofnon-environmental services for environmental amenities that are alreadyabundant. Thus, as income rises from low to middle levels, a U shape can result. Yet an N shape might eventually result, as richer households spend all income on clean inputs. Further substitution possibilities are exhausted.Thus as income rises again pollution rises and environmental quality falls. Copyright Kluwer Academic Publishers 2004

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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 27 (2004)
    Issue (Month): 2 (February)
    Pages: 187-200

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    Handle: RePEc:kap:enreec:v:27:y:2004:i:2:p:187-200

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: development; environment; growth; substitution;

    References

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    Cited by:
    1. Di Vita, Giuseppe, 2008. "Is the discount rate relevant in explaining the Environmental Kuznets Curve?," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 191-207.
    2. William K. Jaeger & Van Kolpin, 2008. "The Environmental Kuznets Curve from Multiple Perspectives," Working Papers 2008.38, Fondazione Eni Enrico Mattei.
    3. John H. Y. Edwards & Christian Langpap, 2008. "Fuel Choice, Indoor Air Pollution, and Children's Health," Working Papers 0803, Tulane University, Department of Economics.
    4. Kavi Kumar, K.S. & Viswanathan, Brinda, 2007. "Changing structure of income indoor air pollution relationship in India," Energy Policy, Elsevier, vol. 35(11), pages 5496-5504, November.
    5. Ezequiel Uriel & Javier Ferri & Maria Luisa Molto, 2005. "Estimation of an Extended SAM with household production for Spain 1995," Economic Systems Research, Taylor & Francis Journals, vol. 17(3), pages 255-278.
    6. Siqi Zheng & Rui Wang & Edward L. Glaeser & Matthew E. Kahn, 2011. "The greenness of China: household carbon dioxide emissions and urban development," Journal of Economic Geography, Oxford University Press, vol. 11(5), pages 761-792, September.
    7. Cox, Adam & Collins, Alan & Woods, Lee & Ferguson, Neil, 2012. "A household level environmental Kuznets curve? Some recent evidence on transport emissions and income," Economics Letters, Elsevier, vol. 115(2), pages 187-189.
    8. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
    9. Ouedraogo, Boukary, 2006. "Household energy preferences for cooking in urban Ouagadougou, Burkina Faso," Energy Policy, Elsevier, vol. 34(18), pages 3787-3795, December.
    10. Di Vita, Giuseppe, 2008. "Capital accumulation, interest rate, and the income-pollution pattern. A simple model," Economic Modelling, Elsevier, vol. 25(2), pages 225-235, March.
    11. Mooney, Daniel F. & Barham, Bradford L., 2013. "What Drives the Adoption of Clean Agricultural Technologies? An Ex Ante Assessment of Sustainable Biofuel Production in Southwestern Wisconsin," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150557, Agricultural and Applied Economics Association.

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