Centre for Development Economics
Department of Economics, Delhi School of Economics


Necessary and sufficient conditions
for an environmental Kuznets curve with some examples


Sushama Murthy

University of Exeter

Thursday, 27th March 2014 at 3:00 PM

Venue : Seminar Room (First Floor)
Department of Economics, Delhi School of Economics

All are cordially invited

We propose a set of necessary and sufficient conditions for the environmental Kuznets curve (EKC) phenomenon in a general model that permits non-smooth preferences and feasible sets and corner solutions for welfare maximisation. These conditions pertain to the relationship between the sets of preference and technology-based shadow prices at an outcome reached by an emission-held-fixed-effect (EHFE), where the emission policy does not adjust to an increase in the economic resource base and only consumption adjusts.  In particular, an EKC arises if and only if there exists a threshold level of resource such that, at any level of resource below (respectively, above) the threshold, the outcome reached by the EHFE is one where the set of preference-based shadow prices lies completely below (respectively, above) the set of technological shadow prices. This characterisation is employed to study and construct examples of preference-technology combinations that result in an EKC. In particular, the cases of emission as a consumption externality in homothetic economies and economies with increasing returns to abatement, emission as a normal good, emission as a production externality induced by usage of fossil-fuels, and EKC in models with economic growth are studied.


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