Economic Growth, Industrialization and the Environment

Abstract

This paper argues the compositional shift from agricultural to industrial production - industrialization - is a central determinant of changes in environmental quality as economies develop. A simple two-sector model of neoclassical growth and the environment in a small open economy is developed to examine how industrialization affects the environment. The model is estimated using sulfur emissions data for 68 countries over the period 1970-2000. The results show the process of industrialization is a significant determinant of observed changes in emissions: a 1% increase in industry's share of total output is associated with an 24% increase in the level of emissions per capita.