Poverty and Environmental Degradation: Searching for Theoretical Linkages

Existing literature about poverty and environmental degradation suggests that poverty is the victim of environmental degradation, but could not conclude whether poverty is also the cause of environmental problems. However, most of those studies are empirical i.e. analyze case studies in certain locations and very specific to certain types of environmental problem, not theoretical or analytical studies which are based on behavioral economic model. Some relevant analytical economic models which are based on standard assumption of optimizing economic agents are surveyed. Those models confirm, among others, the significant role of property right and the way population growth may interact in the nexus. In addition to that, they may introduce some additional insights such as how environmental degradation could be seen as rational decision of the poor to disinvest in base-resource and the way that institutional failure may also be endogenously caused by poverty. The discussion of some limitation of both empirical and theoretical literature suggest that more economically-relevant definition of environmental degradation, and more emphasis on proper valuation of natural resources are necessary.