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Is the discount rate relevant in explaining the Environmental Kuznets Curve?

  • Di Vita, Giuseppe

In this paper we use Pindyck's model [Pindyck, R. S. (2002). Optimal timing problems in environmental economics. Journal of Economic Dynamics and Control, 26, 1677-1697] to show that the discount rate may play an important role in accounting for the income-pollution pattern observed in the real world. Low levels of income involve high values of discount rate, that are obstacles to the adoption of a pollution abatement policy. Only when the discount rate falls, as a consequence of growth, will it be possible to implement measures for emissions reduction. Thus we are able to derive an inverse U-shaped income-pollution pattern, making use of an argument that has not yet been fully considered in the economic debate on this issue.

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Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 30 (2008)
Issue (Month): 2 ()
Pages: 191-207

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Handle: RePEc:eee:jpolmo:v:30:y:2008:i:2:p:191-207
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505735

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