Does economic growth harm the environment?

It is often thought that there is a tension between growth and the environment. This may arise through either the use of resources, the growth of population, or both. What does the evidence say, and what the sources of either positive or negative impacts of growth on the environment?

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Academic References

  1. Acemoglu, D. and Johnson, S. (2007) “Disease and Development: The Effect of Life Expectancy on Economic Growth,” Journal of Political Economy, 115(6), pp. 925–985. Available at: Link.
    • Abstract

      We exploit the major international health improvements from the 1940s to estimate the effect of life expectancy on economic performance. We construct predicted mortality using preintervention mortality rates from various diseases and dates of global interventions. Predicted mortality has a large impact on changes in life expectancy starting in 1940 but no effect before 1940. Using predicted mortality as an instrument, we find that a 1 percent increase in life expectancy leads to a 1.7-2 percent increase in population. Life expectancy has a much smaller effect on total GDP, however. Consequently, there is no evidence that the large increase in life expectancy raised income per capita. (c) 2007 by The University of Chicago. All rights reserved..

  2. Peretto, P. and Valente, S. (2015) “Growth on a finite planet: resources, technology and population in the long run,” Journal of Economic Growth, 20(3), pp. 305–331. doi: 10.1007/s10887-015-9118-z.
    • Abstract

      We study the interactions between technological change, resource scarcity and population dynamics in a Schumpeterian model with endogenous fertility. We find a steady state in which population is constant and determined by resource scarcity while income grows exponentially. If labor and resources are substitutes in production, income and fertility dynamics are stable and the steady state is the global attractor of the system. If labor and resources are complements, income and fertility dynamics are unstable and drive the economy towards either demographic explosion or collapse. We calibrate the model numerically to match past US data on fertility and land scarcity, obtaining future scenarios for the current century and quantifying the response of fertility and productivity to exogenous shocks. Copyright Springer Science+Business Media New York 2015

  3. Stern, D. I. (2004) “The Rise and Fall of the Environmental Kuznets Curve,” World Development, 32(8), pp. 1419–1439.
    • Abstract

      This paper chronicles the story of the environmental Kuznets curve (EKC). The EKC proposes that indicators of environmental degradation first rise, and then fall with increasing income per capita. However, recent evidence shows that developing countries are addressing environmental issues, sometimes adopting developed country standards with a short time lag and sometimes performing better than some wealthy countries, and that the EKC results have a very flimsy statistical foundation. A new generation of decomposition models can help disentangle the true relations between development and the environment.

  4. Stern, N. (2007) The Economics of Climate Change: The Stern Review. Cambridge, UK: Cambridge University Press.
  5. Stokey, N. L. (1998) “Are There Limits to Growth?,” International Economic Review. Blackwell Publishing for the Economics Department of the University of Pennsylvania and Institute of Social and Economic Research – Osaka University, 39(1), pp. 1–31. Available at: Link.
    • Abstract

      A simple theoretical model of pollution is developed that generates an inverted U-shape relationship between per capita income and environmental quality. This model is then used to study long-run growth. The same inverted U-shape is shown to appear in time series, and the prospects for sustained growth are shown to hinge on whether increasingly strict environmental regulation is compatible with a constant rate of return on capital. Implementation is also studied. Tax and voucher schemes are shown to have an advantage over direct regulation because they provide the correct incentives for capital accumulation.

  6. Young, A. (2005) “The Gift of the Dying: The Tragedy of Aids and the Welfare of Future African Generations,” The Quarterly Journal of Economics, 120(2), pp. 423–466. Available at: Link.
    • Abstract

      This paper simulates the impact of the AIDS epidemic on future living standards in South Africa. I emphasize two competing effects. On the one hand, the epidemic is likely to have a detrimental impact on the human capital accumulation of orphaned children. On the other hand, widespread community infection lowers fertility, both directly, through a reduction in the willingness to engage in unprotected sexual activity, and indirectly, by increasing the scarcity of labor and the value of a woman’s time. I find that even with the most pessimistic assumptions concerning reductions in educational attainment, the fertility effect dominates. The AIDS epidemic, on net, enhances the future per capita consumption possibilities of the South African economy. \copyright 2005 MIT Press

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