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Growth and Pollution Convergence: Theory and Evidence

Author

Listed:
  • Carlos Ordás Criado

    (ETH Zurich, Center for Energy Policy and Economics (CEPE).)

  • Simone Valente

    (ETH Zurich, Center of Economic Research (CER).)

  • Thanasis Stengos

    (University of Guelph.)

Abstract

Stabilizing pollution levels in the long run is a pre-requisite for sustainable growth. We develop a neoclassical growth model with endogenous emission reduction predicting that, along optimal sustainable paths, pollution growth rates are (i) positively related to output growth (scale effect) and (ii) negatively related to emission levels (defensive effect). This dynamic law reduces to a convergence equation that is empirically tested for two major and regulated air pollutants - sulfur oxides and nitrogen oxides - with a panel of 25 European countries spanning the years 1980-2005. Traditional parametric models are rejected by the data. More flexible regression techniques confirm the existence of both the scale and the defensive effect, supporting the model predictions.

Suggested Citation

  • Carlos Ordás Criado & Simone Valente & Thanasis Stengos, 2011. "Growth and Pollution Convergence: Theory and Evidence," Working Papers 1106, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2011-06.
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    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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