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Limit Cycles Under a Negative Effect of Pollution on Consumption Demand: The Role of an Environmental Kuznets Curve

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  • Stefano Bosi

    (University of Evry)

  • David Desmarchelier

    (University of Lorraine)

Abstract

Since Heal (Explorations in natural resource economics. The Johns Hopkins University Press for Resources for the Future, Baltimore, 1982), there is a theoretical consensus about the occurrence of limit cycles (through a Hopf bifurcation) under a positive effect of pollution on consumption demand (compensation effect) and about the impossibility under a negative effect (distaste effect). However, recent empirical evidence advocates for the relevance of distaste effects. Our paper challenges the conventional view on the theoretical ground and reconciles theory and evidence. The environmental Kuznets curve (EKC) (pollution first increases in the capital level then decreases) plays the main role. Indeed, the standard case à la Heal (limit cycles only under a compensation effect) only works along the upward-sloping branch of the curve while the opposite (limit cycles only under a distaste effect) holds along the downward-sloping branch. Welfare effects of taxation also change according to the slope of the EKC.

Suggested Citation

  • Stefano Bosi & David Desmarchelier, 2018. "Limit Cycles Under a Negative Effect of Pollution on Consumption Demand: The Role of an Environmental Kuznets Curve," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(2), pages 343-363, February.
    • Handle: RePEc:kap:enreec:v:69:y:2018:i:2:d:10.1007_s10640-016-0082-7
    DOI: 10.1007/s10640-016-0082-7
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    Cited by:

    1. Takuma Kunieda & Kazuo Nishimura, 2021. "Pollution, Human Capital, and Growth Cycles," Creative Economy, in: Kazuo Nishimura & Masatoshi Murase & Kazuyoshi Yoshimura (ed.), Creative Complex Systems, chapter 0, pages 85-99, Springer.
    2. Camille Hainnaux & Thomas Seegmuller, 2022. "Pollution versus Inequality: Tradeoffs for Fiscal Policy," Working Papers hal-03792493, HAL.
    3. Stefano Bosi & David Desmarchelier, 2017. "Are the Laffer curve and the green paradox mutually exclusive?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(5), pages 937-956, October.
    4. Bosi, Stefano & Desmarchelier, David, 2018. "An economic model of metapopulation dynamics," Ecological Modelling, Elsevier, vol. 387(C), pages 196-204.
    5. Bosi, Stefano & Desmarchelier, David, 2018. "Natural cycles and pollution," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 10-20.
    6. Stefano Bosi & David Desmarchelier, 2017. "A simple method to study local bifurcations of three and four-dimensional systems: characterizations and economic applications," Working Papers of BETA 2017-07, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    7. Can Askan Mavi, 2017. "What Can Abrupt Events Tell Us About Sustainability ?," Working Papers hal-01628682, HAL.
    8. Bosi, Stefano & Desmarchelier, David, 2019. "Local bifurcations of three and four-dimensional systems: A tractable characterization with economic applications," Mathematical Social Sciences, Elsevier, vol. 97(C), pages 38-50.
    9. Stefano Bosi & David Desmarchelier, 2021. "Pollution effects on disease transmission and economic stability," International Journal of Economic Theory, The International Society for Economic Theory, vol. 17(2), pages 169-189, June.
    10. David DESMARCHELIER, 2022. "Reconsidering the interplay between endogenous growth and the Environmental Kuznets Curve," Working Papers of BETA 2022-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    11. Maxime MENUET & Alexandru MINEA & Patrick VILLIEU & Anastasios XEPAPADEAS, 2021. "Growth, Endogenous Environmental Cycles, and Indeterminacy," LEO Working Papers / DR LEO 2889, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    12. Ming-Chieh Wang & Chang-Sheng Wang, 2018. "Tourism, the environment, and energy policies," Tourism Economics, , vol. 24(7), pages 821-838, November.
    13. Maxime Menuet & Alexandru Minea & Patrick Villieu & Anastasios Xepapadeas, 2020. "Economic Growth and the Environment: A Theoretical Reappraisal," DEOS Working Papers 2031, Athens University of Economics and Business.
    14. Stefano BOSI & David DESMARCHELIER & Thai HA-HUY, 2024. "Taste for nature and long-run cycles," Working Papers of BETA 2024-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    15. José M. Belbute & Alfredo M. Pereira, 2021. "The Relationship between Consumption and CO 2 Emissions: Evidence for Portugal," Sustainability, MDPI, vol. 13(21), pages 1-16, November.
    16. Can Askan Mavi, 2019. "What can catastrophic events tell us about sustainability?," Post-Print halshs-02142121, HAL.

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    More about this item

    Keywords

    Pollution; Environmental Kuznets curve; Hopf bifurcation; Ramsey model;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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