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The Economics of Nature and the Nature of Economics

Edited by Cutler J. Cleveland, David I. Stern and Robert Costanza

This book discusses important recent developments in the theory, concepts and empirical applications of ecological economics and sustainable development. The editors have assembled a fascinating collection of papers from some of the leading scholars in the field of ecological economics.
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Chapter 8: The environmental Kuznets curve: a review

David I. Stern


David I. Stern INTRODUCTION The environmental Kuznets curve (EKC) hypothesis proposes that there is an inverted U-shape relation between various indicators of environmental degradation and income per capita. This has been taken to imply that economic growth will eventually redress the environmental impacts of the early stages of economic development and that growth will lead to further environmental improvements in the developed countries. Far from being a threat to the environment in the long term, as argued in The Limits to Growth and Beyond the Limits, by Meadows et al. (1972, 1992) among others, economic growth is seen as necessary in order for environmental quality to be maintained or improved. This is an essential part of the sustainable development argument as put forward in Our Common Future by WCED (1987). The EKC literature constitutes an evaluation of these arguments. The EKC is named after Simon Kuznets (1955, 1963) who hypothesized that the relationship between a measure of inequality in the distribution of income and the level of income is an inverted U-shape curve. Figure 8.1 illustrates the typical shape of the EKC. Proponents of the EKC hypothesis argue that at very low levels of economic activity environmental impacts are generally low, but as development proceeds the rates of land clearance, resource use and waste generation per capita increase rapidly. However, ‘at higher levels of development, structural change towards information-intensive industries and services, coupled with increased environmental awareness, enforcement of environmental regulations, better technology and higher environmental expenditures, result in levelling...

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