Economic Growth and the Diffusion of Clean Technologies: Explaining Environmental Kuznets Curves
WIF Institute of Economic Research Working Paper No. 05/42
30 Pages Posted: 13 Mar 2006
Date Written: August 2005
Production often causes pollution as a by-product. Once environmental degradation becomes too severe, regulation is introduced by which society forces the economy to make a transition to cleaner production processes. We model this transition as a change in general purpose technology and investigate how it interferes with economic growth driven by quality-improvements. The model gives an explanation for the inverted U-shaped pollution-income relation found in empirical research for many pollutants (Environmental Kuznets Curve). We provide an analytical foundation for the claim that the rise and decline of pollution can be explained by policy-induced technology shifts and intrasectoral changes.
Keywords: Environmental Kuznets curve, general purpose technology, growth
JEL Classification: O41, Q20
Suggested Citation: Suggested Citation