A Simple Dynamic Model of the Environmental Kuznets Curve: Turning Point and Public Policy

Posted: 10 Aug 2010

See all articles by Hannes Egli

Hannes Egli

affiliation not provided to SSRN

Thomas Michael Steger

University of Leipzig/Institute for Theoretical Economics/Macroeconomics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 1, 2004

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. The model captures two sorts of market failures caused by external effects associated with consumption and environmental effort. This model is employed to investigate the determinants of the turning point and the (relative) effectiveness of different public policy measures aimed at a reduction of the environmental burden. Moreover, the model offers a potential explanation of an N-shaped pollution-income relation. Finally, it is shown that the model is compatible with most empirical regularities on economic growth and the environment.

Keywords: Environmental Kuznets Curve, Pollution, Abatement, External Effects, Economic Growth, Public Policy

JEL Classification: Q5, O4

Suggested Citation

Egli, Hannes and Steger, Thomas Michael, A Simple Dynamic Model of the Environmental Kuznets Curve: Turning Point and Public Policy (July 1, 2004). Environmental and Resource Economics, Vol. 36, No. 1, 2007, Available at SSRN: https://ssrn.com/abstract=1655682

Hannes Egli (Contact Author)

affiliation not provided to SSRN

Thomas Michael Steger

University of Leipzig/Institute for Theoretical Economics/Macroeconomics ( email )

Grimmaische Str. 12
D-04109 Leipzig
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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