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The Environmental Kuznets Curve In The United States

1898 words - 8 pages

When first presented in 1991, the Environmental Kuznets Curve offered an explanation for the relationship between economic growth and environmental quality (Grossman & Krueger, 1991). These early estimates indicated that the quantity of sulfur dioxide, an important environmental indicator, improved as income and consumption increased. These findings were contradictory to the beliefs of the time as, prior to this research, it was commonly assumed that increasing economic development and capitalism would continue to harm the envirnoment and destroy natural resources. The Environmental Kuznets Curve simplifies the relationship between collective behavior, such as changes in a nations wealth into a two-dimensional graph. Since these initial findings, there has been significant research into determining whether or not this relationship exists. Do all factors in environmental quality systematically correlate with economic development? Of course, there are many other variables that may impact environmental quality, however, many of these variables are endogenously embedded in the model and are related to the development of society as the economy evolves. For instance, does the EKC model fails to determine whether the solution to preventing environmental decline is more economic growth; or if pollution is simply an unfortunate output from economic development that we are responsible for abating once the benefits from production outweigh the negative environmental and human health costs.
The American economist Simon Kuznets is famous for winning the Nobel Prize in 1971. He is primarily known for his research demonstrating the relationship between income inequality and per-capita income. The theory suggests that as an economy develops, natural market forces cause increasing income inequality until a certain per-capita income threshold is reached and then starts to move back toward greater equality (Kuznets, 1955). This relationship is graphically depicted as an upside down U-shape.
Kuznets’s theory was adapted to take on a new significant relationship between environmental quality and per capita income across time in 1991 when by G.M Grossman and A.B. Krueger. Their evidence indicated that there is the same upside down U-shape was present in the relationship between per capita income and economic inequality. It is also applicable to the correlations between average per capita income and the level of environmental degradation (Figure 2). At very low levels of per-capita income, such as pre-industrial or agrarian economies, societies usually do not have the resources to partake in in environmentally harming in activities. As a country begins to develop into a more advanced industrial or manufacturing society, more natural resources are used and more pollutants are emitted. This is often due to a focus on maximizing output by relying on relatively inefficient machines that is coupled with an unawareness or disregard for the potential...

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