On the mechanics of the "Green Solow Model"
Brock and Taylor (2010) argue that the Environmental Kuznets Curve (EKC) - a hump shaped relationship between emissions and income per capita - is driven by falling GDP growth rates associated with Solow type convergence. I test the importance of their mechanism as a driver of emissions by performing a "pollution accounting" exercise that decomposes emissions data into pollution intensity and GDP growth e ects. The "Green Solow" framework assumes that emission intensities decline at a constant rate and hence that all changes in emissions growth rates are driven by changes in GDP growth rates. Yet, in the data, emission intensities are hump shaped for a wide range of countries and pollutants, implying declining emission intensity growth rates. Furthermore, this decline in emission intensity growth rates is an order of magnitude larger than changes in GDP growth rates. The Green Solow model - which assigns all the weight to changing GDP growth and ig- nores changes in emission intensity growth in its explanation of emissions - cannot be the right way to think about emissions profiles of countries. Models that aim to explain the EKC, must - first and foremost - explain the hump shape intensity curve and hence falling intensity growth rates. I suggest a simple model of structural transformation as one possible mechanism capable of generating both a hump shaped EKC curve and a hump shaped emission intensity curve.
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