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Structural Change, Environment and Well-being: Interactions Between Production and Consumption Choices of the Rich and the Poor in Developing Countries

Author

Listed:
  • Angelo Antoci

    (DEIR, University of Sassari)

  • Paolo Russu

    (University of Sassari)

  • Elisa Ticci

    (University of Florence)

Abstract

Vulnerability to scarcity or to reduction of natural capital depends on defensive substitution possibilities that, in turn, are affected by the availability of other productive factors. However, in several developing countries asset distribution tends to be highly skewed. Taking into ac- count these elements, this paper argues that environmental degradation may represent a push factor of economic development in an economy polarized into two main classes (the Rich and the Poor) and characterized by the following stylized facts: a) the main income source of the rural poor is self-employment in traditional activities highly depending on natural resources; b) labor remuneration in rural sector represents the basic opportunity cost for (unskilled) labor in the economy. Thus, given that environmental degradation reduces labor productivity of the rural poor, it may depress wages; c) production of the modern sector managed by the rich is less affected by depletion of natural resources because they can adopt defensive strategies that the poor cannot. They are able to defend themselves by partially substituting natural resources with physical capital accumulation and wage labor employment. We will show that, in this context, environmental depletion may benefit the modern sector through an increase in low cost labor supply and, in turn, it may stimulate economic transition. However the structural change is likely to result in an increase in inequality.

Suggested Citation

  • Angelo Antoci & Paolo Russu & Elisa Ticci, 2008. "Structural Change, Environment and Well-being: Interactions Between Production and Consumption Choices of the Rich and the Poor in Developing Countries," Working Papers 2008.48, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2008.48
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    Cited by:

    1. Antoci, Angelo & Russu, Paolo & Ticci, Elisa, 2009. "Distributive impact of structural change: Does environmental degradation matter?," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 266-278, December.

    More about this item

    Keywords

    Production; Consumption Choices; Welfare;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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