The Environmental Kuznets Curve is an inverted U curve, with the Y-axis as inequality and time or per-capita incomes as the X-axis. It is used to graph the hypothesis that as an economy develops, market forces begin to increase and economic inequality decreases.
This theory suggests that as a nation is going through industrialization, and mechanization of agriculture – the nation’s economy will naturally move towards cities. Inequality is expected to decrease when rural populations move towards urban cities.
What are the Implications of the Environmental Kuznets Curve?
The Environmental Kuznets Curve adheres to the same idea of the hypothesized relationship between equality and development. The difference is that looks at environment equality. Before the Environmental Kuznets Curve hypothesis, it was generally assumed that rich economies destroyed the environment at a faster pace than poorer countries.
However, with the Environmental Kuznets Curve hypothesis, the relationship between the environment’s health and the economy is reanalyzed. The idea is that as economic development growth occurs, the environment will worsen until a certain point where the country reaches a specific average income. Then money is invested back into the environment, and the ecosystem is restored.
The Environmental Kuznets Curve hypothesis implies that:
1. When an economy is primarily pre-industrial and agrarian, there is a clean environment untouched by pollutants from industrial economic activities.
2. As the economy shifts towards development and industrialization, the environment is at a higher risk of being harmed by pollution and depletion of natural resources.
3. The curve then returns to a cleaner environment when economic growth continues, and people choose to spend their incomes on improving the environment by cleaning water and improving air quality. People become more aware of the benefits to the environment.
There are apparently many limitations to the Environmental Kuznets Curve hypothesis. However, there have been several studies to show that specific environmental issues do follow the Kuznets Curve. These include air and water pollutants such as quantities of sulfur dioxide, suspended particulate matter, and fecal coliform.
Of course, it is difficult to make general statements as the Environmental Kuznets Curve relationship is dependent on the specific pollutant, the place, and what time frame. As Economists conduct more studies, we will be able to reach a better understanding of what changes we can make to benefit both the environment and the economy.