By now the observation that some pollutants appear to increase and then decrease with economic development has become a widely accepted stylized fact. This paper argues that the fundamental insight of the empirical literature is merely that pollution does not necessarily increase with economic growth, and that the fundamental insight of the theoretical literature is that the observed inverse-U-shaped pollution-income relationship is neither necessary nor sufficient for Pareto-efficient environmental policies. Furthermore, the inverse-U-shaped path is not unique to environmental phenomenon, and may exist wherever a desirable good generates an undesirable side-effect. Finally, all of these points can be made without most of the econometric or theoretical mechanics that fill this literature.
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Paper provided by Georgetown University, Department of Economics in its series Working Papers with number
gueconwpa~01-01-16.
Length: Date of creation: Date of revision: Handle: RePEc:geo:guwopa:gueconwpa~01-01-16
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