Environmental Kuznets Curve And Long-run Economic Growth

Most of countries in the world before 1970s feverishly focus on economic growth and development by advocating industrialization at the cost of environmental and social sustainablity. The Member in the Club of Rome believed prospectively that the limited resource in the earth would impede economic growth and the only way avoiding calamity of environment disorder is keeping zero economic growth which confronted the relationship between economic growth and usage of environment resources to us. Although some developed countries have token action in environment protection, unified and positive concerted action had not been reached in the worldwide until United Nations conference on Human Environment and the born of United Nation Environment Program (UNEP) in 1972 which establish many laws of human behaviors and responsibilities as for the common basis of future action. Environment and sustainable development became the most attended topics in the world since then.Environment Kuznets Curve (EKC) hypothesis, based on growth contradiction and relative policies, give the most important notes on growth limitation. EKC hypothesis states that the rise of average income would deteriorate environment and average income growth is also the precondition of environment improvement. However, EKC hypothesis has been questioned by various voices. Even EKC hypothesis holds in developed countries, can it been replicated by less developed countries in their development path? Is high degree pollution inevitable in less developed countries? Whether the less developed countries have to carry on pollution dumped by developed countries through international trade and technical transfer? As less developed countries, how can china achieve its sustainable development confronting unconstraint economic globalization? The dissertation will offer some explanations to those questions, both theatrical and empirical.This study firstly decomposes, by unifying research in environment change and sustainable development in the world, resources and environment pressure caused by thirty-year fast economic growth in china and demonstrates environment quality of air, water and energy in china. And then we survey the theories of EKC by angles of treatment capital, economic transition and technical progress and so on, and the empirical tests of EKC of various pollution. Those studies offer some good advices solving the problem of environment deterioration, but there are also many debates. This study will classify the current researches and discuss the critics and controversies in EKC hypothesis in order to correct the direction of EKC studies and offer new explanations.The dissertation considers the relationship between capital dynamic path and pollution in an autarky economy in the endogenous growth framework. The conclusions show that whether the environment is improved in the path of capital dynamic depends on how people care about their future utility. Technical progress and economic development could improve environment only at the condition that the individuals care their future welfare. If this care is strong enough, the economy will evolve to endogenous sustainable growth path and the environment is improving during the growth of consumption and capital. Through the analysis of model’s dynamics, we find that given technical progress and treatment technology, if the initial environment quality is lower than the level of social optimum, the government could correct the inefficient dynamic path by policies which will create EKC in the economy. Furthermore, the analysis show the Pareto optimum pollution could be achieved by governmental treatment financed by pollution tax levied on pollution firms and consumption tax. Suitable taxation structures could control pollution caused by externality.We test EKC of waste water and SO2 emissions in china with province data from year 2000 to 2006. The results show EKC exists in both pollution while it is not significant for waste water, which implies that average income is not the only explain variable attributing water and SO2 pollution in china. Treatment expenditure and GDP growth show that technical progress and economic globalization may be the factors interpreting pollution. Furthermore, even we ignore technical progress and globalization, the income level in all provinces has not reach the income level of the environment’s turning point. The fact that the turning point of aggregate pollution is far more than average income shows district characters and population migration matter.We believe that it is not sufficient to explain the double pressure of economic growth and environment deterioration in less developed countries only considering the factors in closed economy. Therefore, we will consider EKC hypothesis in open economy and test pollution haven hypothesis, both on the theory and empirical sides. Pollution Haven hypothesis states that the developed countries transfer pollution to the less developed countries by stopping pollution-intensive goods producing and importing those goods from less developed countries, which improve the environment quality in developed countries. In our endogenous growth framework, we find that three different shapes of environment curve could exist in less developed countries because of different capital dynamic paths due to technical progress and open policy. If saving rate and marginal product of human capital are high enough, even the initial physical capital level being very low, the economic will transfer to the process of human capital accumulation and get modern persistent economic growth. The pollution in this dynamic path will demonstrates EKC character. The model shows that since the developed countries transfer pollution-intensive goods to less developed countries due to string environment policy in developed countries in the process of globalization, facing relative high prices of pollution-intensive goods caused by demand of developed countries in open economy, the less developed countries actually produce and export pollution-intensive goods, which will deteriorate the environment in less developed countries and defer the time of environmental change.We consider various pollutions, including waste water, SO2, dust and materials in living, industrial and aggregate level; and we also build industrial pollution index and aggregate pollution index in order to delegate average pollution level. With the province-level panel data from 1997 to 2007, we regress pollution to district dummy, logarithm of average GDP and its square, share of export to GDP, average of authorized patent and foreign direct investment. We get some insightful conclusions. Firstly, China, as the greatest less developed country, carries on pollution reducing in developed countries and has delayed EKC turning points. Secondly, export raises the emission of industrial pollution and technical progress reduces living pollution through changing consumption structure, not the producing structures. Thirdly, pollution characterized district heterogeneous in China. According to the classification of human development indictor, the environment quality in the district with high HDI is not necessary better than the one in the district with low HDI. There are two probable reasons. First, the people in the district with high HDI may show more care to the environment and so they reduce the pollution being easy to control, such as SO2 and dust, but for the pollution being hard to control, such as waste water, they don’t reduce them successfully. Second, high average consumption implied by high average income and high HDI leads to high pollution being hard to monitor, which make the district with high HDI being polluted more seriously. This paper shows that.The main purpose of economic growth and development actually is to expand the freedom of human beings. Therefore, we can not appraise the outcome of economic growth ignoring people’s living and freedom. Human Development Indictor (HDI), the index considering health, education and income of human beings, is efficient index measuring the development level of various countries all over the world. Making humans being fragile to risk, physical capital being deprived and losing development opportunities, which rise invisible costs of economic growth and human development, the environment pollution precipitate the human into the low level development trap. In order to measure the sustainable development of human beings, we combine environment quality with HDI and derive the environment-sensitive human development indictor (EHDI) in china. Basing on EHDI, we classify all provinces in main-land china by cluster analysis. The classification is the main basis of introducing district dummy in the empirical analysis. Through statistical analysis of EHDI, we find environment-sensitive human development process is unbalanced in various provinces in china. Excepting income level, the EHDI difference mainly demonstrates on the environment gap. The district ignoring compatible development of environment protection and economic growth suffer unsustainable economic growth, deterioration of human’s health, expanding of poor people and losing of human capital.