Wealth Heterogeneity and Escape from the Poverty-Environment Trap

Osaka University Economics and OSIPP Working Paper No. 05-09

28 Pages Posted: 6 May 2005

See all articles by Masako Ikefuji

Masako Ikefuji

University of Tsukuba

Ryo Horii

Osaka University - Institute of Social and Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

A mutual link between poverty and environmental degradation is examined in an overlapping generations model with environmental externality, human capital, and credit constraints. Environmental quality affects labor productivity and thus wealth dynamics, whereas wealth distribution determines the degree to which agents rely upon natural resources and therefore the evolution of environmental quality. This interaction creates a "poverty-environment trap," where a deteriorated environment lowers income, which in turn accelerates environmental degradation. We show that greater wealth heterogeneity is the key to escaping the poverty-environment trap, although it has negative effects both on the environment and output when not in the trap.

Keywords: Poverty trap, Environmental degradation, Wealth distribution, Human capital

JEL Classification: O11, O13, O15

Suggested Citation

Ikefuji, Masako and Horii, Ryo, Wealth Heterogeneity and Escape from the Poverty-Environment Trap (May 2005). Osaka University Economics and OSIPP Working Paper No. 05-09. Available at SSRN: https://ssrn.com/abstract=716223 or http://dx.doi.org/10.2139/ssrn.716223

Masako Ikefuji

University of Tsukuba ( email )

Tsukuba University , Ibaraki Ken
Tsukuba, Ibaraki 305-8573, Ibaraki 3050006
Japan

Ryo Horii (Contact Author)

Osaka University - Institute of Social and Economic Research ( email )

1-1 Yamadaoka
Suita, Osaka 565-0871
Japan
+81 6 6879 8552 (Phone)
+81 6 6879 8583 (Fax)

HOME PAGE: http://econ.jpn.org/horii/

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