REM 363/ENV 399 - Week 4 Growth & Environment

1. REM 363/ENV 399 - Week 4 Growth & Environment

2. Why is growth considered so important? • To reduce poverty and close the gap in per capita incomes between countries → theory of convergence suggests this should happen • To reduce unevenness in the distribution of income within countries → “rising tide” theory vs. redistribution • Do these ideas hold empirically?

3. Testing for Convergence: cross-country initial GDP per capita vs. average growth rates, mid-1900s to 2000 a. Rich countries only ↓ b. All countries/regions ↑ Source: Charles I Jones, Introduction to Economic Growth 2002

4. Is income getting more evenly distributed? Yes, it is … Note: left axis is number of people (x1000); bottom axis is income in $US Source: Pinkovskiy and Sala-i-Martin (2009)

5. Happiness and GDP per capita across countries

6. Post-Second World War trends in happiness and GDP per capita in the USA

7. Are there environmental Limits to Growth? • IPAT Identity (Ehrlich 1970s):Impact = Population x Affluence x Technology (nos.) (income per capita) (impact per $GDP) e.g. One Tonne Challenge 35 million pers x $30,000/pers x .33 kg CO2/$GDP = a lot of CO2 !! • Resource depletion: • renewable • non-renewable

8. K Maximum Sustainable Yield (MSY) Growth Rate (t/yr) POPULATION (stock size) Time STOCK SIZE Carrying Capacity (K) The logistic curve (left) and the Schaefer curve (right), showing the formulation of MSY from basic ecological considerations

9. Limits to growth modelling Club of Rome's Limits to Growth model (ca 1972) First attempt to model the world system; very controversial Tested different sets of assumptions about resource use, population, output and pollution Basic result is a collapse unless drivers of growth are stabilized Critique: Nordhaus (1973) and substitution among production inputs and the role of “prices”

10. Julian Simon and resource scarcity

11. Human Appropriation of Terrestrial NPP (Net Primary Product in Petagrams) Source: Vitousek et al. 1986

12. Human Appropriation of Aquatic NPP to Sustain Global Fisheries Source: Pauly & Christensen, 1995

13. Environmental degradation Income per capita Can growth be good for the environment? Environmental Kuznets Curve (EKC)

14. Standard Specification for the EKC Et = b0 + b1 Yt+ b2 Yt2 + b3 Yt3 + … + cB + dt + eit Et = an environmental indicator for country i at time t Yt = per capita income for country i at time t B = a set of other explanatory variables (geographic) t = time et= error term Source: Ekins (1997)

15. Environmental degradation Environmental degradation Environmental degradation Environmental degradation Environmental degradation Environmental degradation Income per capita Income per capita Income per capita Income per capita Income per capita Income per capita Empirical results for the EKC (Ekins 1997) True EKC = SO2, Particulates, NO2,X, CO/CO2, water quality, deforestation