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

RSPAS, ANU Trade and Development Economics Working Paper

36 Pages Posted: 28 Feb 2004

See all articles by Raghbendra Jha

Raghbendra Jha

Australian National University (ANU) - Australia South Asia Research Centre (ASARC); Crawford School of Public Policy

K. V. Bhanu Murthy

University of Delhi - School of Economics - Commerce Department; Delhi Technological University

Date Written: February 2004

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.

Keywords: Global environmental degradation

JEL Classification: Q52, Q54, Q56

Suggested Citation

Jha, Raghbendra and Murthy, K. V. Bhanu, A Consumption Based Human Development Index and the Global Environmental Kuznets Curve (February 2004). RSPAS, ANU Trade and Development Economics Working Paper, Available at SSRN: https://ssrn.com/abstract=509243 or http://dx.doi.org/10.2139/ssrn.509243

Raghbendra Jha (Contact Author)

Australian National University (ANU) - Australia South Asia Research Centre (ASARC) ( email )

Canberra, Australian Capital Territory 0200
Australia
+61 2 6125 2683 (Phone)
+61 2 6125 0443 (Fax)

HOME PAGE: http://crawford.anu.edu.au/crawford_people/content/staff/acde/rjha.php

Crawford School of Public Policy

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

K. V. Bhanu Murthy

University of Delhi - School of Economics - Commerce Department ( email )

59 Vaishali Enclave
Pitampura
Delhi, 110034
India
+91 11 27667891 (Phone)

Delhi Technological University ( email )

Delhi
India

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