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What drives the long-term relationship between economic development and environmental quality? The role of spatial dispersion vs. agglomeration

Author

Listed:
  • Wu, JunJie
  • Segerson, Kathleen
  • Langpap, Christian

Abstract

The dramatic improvement in air quality in major Chinese cities in recent years has led to renewed interest in the question of whether economic development allows a country to “grow” out of its environmental problems. We shed new light on this question by identifying a new factor that can drive the long-term relationship between economic development and environmental quality, namely, a spatial effect that arises from a tradeoff between environmental quality and agglomeration economies. We show theoretically that this spatial effect can lead to an inverted U-shaped relationship between income and pollution, i.e., an environmental Kuznets curve. In addition, we decompose changes in US air pollution concentrations from 1990 to 2017 to allow for a possible spatial effect. Results point to the potential importance of a spatial effect in explaining the reductions in carbon monoxide (CO) concentrations. However, little of the change in sulfur dioxide (SO2) concentrations in the US can be attributed to a potential spatial effect.

Suggested Citation

  • Wu, JunJie & Segerson, Kathleen & Langpap, Christian, 2025. "What drives the long-term relationship between economic development and environmental quality? The role of spatial dispersion vs. agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:jeeman:v:131:y:2025:i:c:s0095069625000105
    DOI: 10.1016/j.jeem.2025.103126
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    Keywords

    Agglomeration economies; Firm relocation; Economic development; Environmental Kuznets curve; Spatial effect;
    All these keywords.

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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