Empirical Analysis of National Income and SO2 Emissions in Selected European Countries

The linkage between per capita GDP and sulfur emissions for 12 Western European countries was analyzed over a period of more than 150 years. The analysis also looked at the impact of air pollution regulations on the shape of the income–pollution relationship. At both the aggregate and country levels, we find an inverted U-shaped relationship and the estimated turning points of most countries are plausible. In addition, environmental regulations are found to lower the EKC and they can also shift the turning point of the curve. In some cases, the shift is to the left and in a few to the right.     

How substitutable is natural capital?

One of the recurring themes in the sustainability literature has been the extent to which a loss of natural capital can be made up for in welfare terms by an increase in other forms of capital. This issue was raised early on in the debate on sustainability by Pearce and has never really been resolved. This paper is an empirical attempt to measure the degree of substitutability between different forms of capital. A nested CES production function is used to allow flexibility in the estimated elasticities of substitution. Also, within this specification, natural resources and other inputs are combined in different levels of the function, thus allowing for different levels of substitutability. Institutional and economic indicators are also incorporated in the production function estimated. Results show that the elasticities derived from functions involving land resources were generally around one or greater, implying a fairly high degree of substitutability. Furthermore, changes in trade openness and private sector investment have a statistically significant and direct relationship on the efficiency of production and hence on income generation. No statistically significant relationship between income and any of the institutional indicators was found.