The simple analytics of the environmental Kuznets curve: a reformulation
Indian Growth and Development Review
ISSN: 1753-8254
Article publication date: 29 October 2024
Issue publication date: 6 November 2024
Abstract
Purpose
This paper aims to review the relationship between per capita income and aggregate emission in an economy populated by rational agents. According to the environmental Kuznets curve (EKC) hypothesis, pollution–income relationship is an inverted U-shaped curve. This paper aims to derive that relationship in an endogenous way and extends the relevant literature in an important way.
Design/methodology/approach
This paper formulated a general equilibrium model of homogenous population with identical tastes and preferences. Production side is modelled with firms operating in a monopolistically competitive environment. The approach is modelling the economy in an analytical way so that closed form solutions can be achieved. Model simulations have also been performed to get a clear view of results.
Findings
This study shows that increasing returns to scale in abatement technology ceases to be a sufficient condition for the generation of the EKC hypothesis. The general equilibrium structure of the model allows studying the endogenous evolution of income, emissions and prices of the abatement goods in a unified setting.
Originality/value
The paper is novel and original in nature. The results are new in the literature. These results extend and generalise the previous research work in this area in an important way. The sufficient condition that is obtained in this study limits the applicability of EKC in an otherwise identical economy as used in previous literature. Therefore, this paper adds value to the ongoing research related to EKC.
Keywords
Acknowledgements
The authors would like to thank the anonymous referees and an associate editor of this journal for their constructive comments and suggestions, which have greatly enriched the quality of this paper. An earlier version of this paper was presented at the webinar titled “Contemporary Issues in Growth and Development: A Tribute to Professor Manash Ranjan Gupta” in November 2021. The second author wishes to acknowledge the valuable comments and suggestions from participants, particularly from Manash Ranjan Gupta. Parts of this article are adapted from the ongoing thesis work of the first author at the Indian Institute of Technology Delhi. Any remaining errors are solely our responsibility.
Statements and declarations: The authors have no conflicts of interest to declare that are relevant to the content of this article.
Funding: The authors did not receive funding or grants directly related to the research presented in this manuscript.
Citation
Chingri, S. and Mondal, D. (2024), "The simple analytics of the environmental Kuznets curve: a reformulation", Indian Growth and Development Review, Vol. 17 No. 3, pp. 422-440. https://doi.org/10.1108/IGDR-09-2023-0129
Publisher
:Emerald Publishing Limited
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