Some microfoundations for the environmental Kuznets curve

Economics

Further details

A new modelling methodology is proposed for a comparative static study of how emission and consumption levels vary with changes in the levels of economic resources in a static framework. Due importance is given to emission-causing inputs and a rich set of abatement options can be modelled. Preferences are common for all countries, but their choices can reflect differences in both the marginal valuation of consumption relative to environmental quality and how it responds to changes in the consumption level across poor and rich countries. A special case of this modelling methodology demonstrates the importance of (i) the nature of substitutability and/or complementarities between various inputs,  (ii) the marginal returns to various inputs,  (iii) the available set of abatement strategies, and  (iv) the relative strengths of the income and substitution effects induced by increases in resources for determining the shape of the  consumption-emission graph.