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A Consumption Based Human Development Index and The Global Environmental Kuznets Curve

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  • Raghbendra Jha
  • K.V. Bhanu Murthy

Abstract

We extend the analysis of Jha and Murthy (2003) to relate consumption to environmental degradation (conceived of as a composite) within a cross-country framework. We use the method of Principal Components Analysis (PCA) to construct an Environmental Degradation Index (EDI) for each country and global environmental degradation (GED) as the sum of the EDI's. We then identify outliers and influential observations among both the environmental and consumption related variables. Canonical Discriminant analysis is then used to classify development classes along environmental lines. We then estimate a simultaneous equation model to analyze the pattern of causation between per capita income, consumption and environmental degradation. We estimate a Global Environmental Kuznets curve (GEKC) as a relation between EDI ranks and ranks of the consumption-based EDI. A cubic representation is most appropriate with high-consumption countries contributing excessively to GED and middle-consumption countries slightly less. Low-consumption countries are contributing insignificantly to GED. Finally we present an alternative consumption-based Human Development Index to UNDP's income-based Human Development Index. We then compare the ranking of countries according to the consumption-based HDI ranks with their ranking according to their EDI. Two sets of data drawn from the Human Development Report (HDR) UNDP(2000)) are used in the analysis. One relates to the environment and the other to developmental variables. For the formation of a composite index that would enable the estimation of a GEKC for 174 countries, we used cross-sectional data used in the HDR. The two main contributions of this paper are to build a consumption based HDI and to estimate a Global EKC based on consumption. A simultaneous equations model explains the causal structure that is responsible for Global Environmental Degradation. Further, with Canonical Discriminant Analysis it has been shown that GED does not have geo-physical basis but an anthropogenic basis. As a part of the system of equations a Global Consumption Function has been estimated that displays interesting results. In net, the paper attempts to establish that a certain 'type of development' that characterizes high consumption countries is primarily responsible for Global Environmental Degradation.

Suggested Citation

  • Raghbendra Jha & K.V. Bhanu Murthy, 2004. "A Consumption Based Human Development Index and The Global Environmental Kuznets Curve," Departmental Working Papers 2004-03, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2004-03
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    References listed on IDEAS

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    Cited by:

    1. Valeria Costantini & Salvatore Monni, 2005. "Measuring Human Development and Environmental Sustainability in European Countries," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
    2. Carlo Orecchia & Maria Elisabetta Tessitore, 2011. "Economic Growth and the Environment with Clean and Dirty Consumption," Working Papers 2011.57, Fondazione Eni Enrico Mattei.
    3. Mraihi, Rafaa & Harizi, Riadh & Mraihi, Talel & Bouzidi, Mohamed Taoufik, 2015. "Urban air pollution and urban daily mobility in large Tunisia׳s cities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 315-320.
    4. Nayak, Purusottam, 2013. "Methodological Developments in Human Development Literature," MPRA Paper 50608, University Library of Munich, Germany.

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    More about this item

    Keywords

    Consumption-based HDI; Global Environmental degradation; Environmental Kuznets Curve;
    All these keywords.

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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