Unveiling the Income-Environment Relationship: An Exploration into the Determinants of Environmental Quality
This paper decomposes the reduced form income-environment relationship into its structural sources. It identifies a level effect, a composition effect, and an abatement effect. This decomposition is implemented using global data on suspended particulate matter in the air. The level and composition effects are found to conform to their a priori expected linear and quadratic forms, respectively. The abatement effect is found to be generally downward sloping, though not exactly conforming to the expected inverted-J shape.
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