Econometrics Informing Natural Resources Management
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Econometrics Informing Natural Resources Management

Selected Empirical Analyses

  • New Horizons in Environmental Economics series

Edited by Phoebe Koundouri

This fascinating book outlines the fundamental principles and difficulties that characterise the challenging task of using econometrics to inform natural resource management policies, and illustrates them through a number of case studies from all over the world. The book offers a comprehensive overview of the broader picture of the state-of-the-art in econometrics as applied to environmental and natural resource management.
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Chapter 16: Examining the Environmental Kuznets Curve: what can Kernel estimation say?

Salvatore Di Falco

Extract

16. Examining the Environmental Kuznets Curve: what can Kernel estimation say? Salvatore Di Falco 1. INTRODUCTION The relation between economic development and environmental quality in the last ten years has captured a lot of attention in the scientific community. Today it is one of the most lively research lines in Environmental and Resource Economics. In fact after some seminal papers, for instance: Shafik and Bandyopadhyay (1992), Grossman and Krueger (1991, 1993, 1995), Panayotou (1993), Saldon and Song (1994), an increasing amount of this literature has flourished around the so-called Environmental Kuznets Curve hypothesis (EKC, hereafter), and this is likely to continue for some time. The EKC is an empirical finding which relates environmental degradation, captured by some environmental quality indicators, and per capita income levels. The hypothesized functional relation between these two variables is concave. Therefore, environmental degradation will initially increase and after a ‘peak’ in a successive stage decrease as the level of income increases. In other words, after a first stage in which economic development is harmful to the environment, there exists a stage in which higher levels of per capita income are positively correlated with an improvement in environmental quality. So, richer and greener is not only to be hoped for, it is also to be expected, and it is possible to ‘grow out’ of some environmental problems. The simple (or simplistic?) policy implication is that, as stated by Beckerman (1992), ‘the best way for countries to reach low levels of environmental degradation is to...

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