A Dynamic Model of the Environmental Kuznets Curve: Turning Point and Public Policy |
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Authors: | Hannes Egli Thomas M. Steger |
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Affiliation: | (1) CER-ETH – Center of Economic Research at ETH Zurich, ZUE F 10, CH-8092 Zurich, Switzerland;(2) CER-ETH – Center of Economic Research at ETH Zurich, ZUE F13, CH-8092 Zurich, Switzerland |
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Abstract: | We set up a simple dynamic macroeconomic model with (i) polluting consumption and a preference for a clean environment, (ii) increasing returns in abatement giving rise to an EKC and (iii) sustained growth resulting from a linear final-output technology. There are two sorts of market failures caused by external effects associated with consumption and environmental effort. The model is employed to investigate the determinants of the turning point and the cost effectiveness of different public policies aimed at a reduction of the environmental burden. Moreover, the model offers a potential explanation of an N-shaped pollution–income relation. It is shown that the model is compatible with most empirical regularities on economic growth and the environment. |
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Keywords: | abatement economic growth environmental Kuznets curve external effects pollution public policy |
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