A new approach to pollution modelling in models of the environmental Kuznets curve
Models of the Environmental Kuznets Curve, particularly those with an ex- plicit abatement technology, often involve that pollution becomes negative in the long run. This, of course, is a highly implausible prediction. The paper at hand examines the problem of negative pollution by, ¯rst, critically discussing two approaches adopted in existing EKC models and, second, by proposing a new approach. Motivated by the debatable assumption of perpetually increas- ing returns to scale in abatement, the idea of fading increasing returns to scale is introduced. This procedure does not only constitute a solution to the theo- retical problem of negative pollution, but also does well regarding the empirical plausibility of the abatement technology.
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