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Preferences, Technology, and the Environment: Understanding the Environmental Kuznets Curve Hypothesis

By Florenz Plassmann and Neha Khanna

Abstract

We derive a simple expression for the income-pollution path using the standard static model of the environmental Kuznets curve (EKC). This expression makes it straightforward to identify the general characteristics of utility and pollution functions that lead to such a curve. We show that suitable preferences can always lead to an EKC while there is no technology that yields an EKC for all types of preferences, and we derive a sufficient condition for technology that leads to an EKC for almost all types of preferences. Our results hold for a model with multiple goods with different pollution intensities and for a production economy with nonconstant relative price of consumption and environmental effort. We derive our results without assuming specific functional forms and we encompass several other models as special cases. Copyright 2006, Oxford University Press.

DOI identifier: 10.1111/j.1467-8276.2006.00884.x
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