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

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  • Hannes Egli
  • Thomas Steger

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. There are two sorts of market failures caused by external effects associated with consumption and environmental effort. The model is employed to investigate the determinants of the turning point and the cost effectiveness of different public policies aimed at a reduction of the environmental burden. Moreover, the model offers a potential explanation of an N-shaped pollution–income relation. It is shown that the model is compatible with most empirical regularities on economic growth and the environment. Copyright Springer Science+Business Media, Inc. 2007

Suggested Citation

  • Hannes Egli & Thomas Steger, 2007. "A Dynamic Model of the Environmental Kuznets Curve: Turning Point and Public Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 36(1), pages 15-34, January.
    • Handle: RePEc:kap:enreec:v:36:y:2007:i:1:p:15-34
    DOI: 10.1007/s10640-006-9044-9
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    More about this item

    Keywords

    abatement; economic growth; environmental Kuznets curve; external effects; pollution; public policy; Q5; O4;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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