We shall consider how different institutional forms can affect the management of environmental problems at different stages of economic development, including for managing biological resources and controlling pollution emissions. Problems of different hierarchical levels from local to global will be considered.
Key to dealing with different stages of economic development is the environmental Kuznets curve (EKC), the hypothesis that pollution increases at first during development and then declines after industrialization in an inverted U-shaped pattern of pollution emissions against time. (1) This term derives from the earlier empirical observation of a tendency for income to first become more unequal and then more equal as societies move through the industrialization process (Kuznets 1955), producing a similar inverted U shape when time is on the horizontal axis and the Gini coefficient (which rises with income inequality) is on the vertical axis. These both suggest that societies may bear temporary costs to develop. However, critics have argued that they may not generally hold, being subject to historical, institutional, geographic, and technological specificities. The socialist world saw increasing income inequality during industrialization, and India and China may leap to more advanced environmental control technologies that limit their pollution as they industrialize, if they can adopt appropriate institutions for implementation and enforcement.
Patterns of Development and Environmental Degradation
Various dynamic patterns of pollution and development relationships occur, varying by pollutant and across societies. The classic EKC pattern has been found to hold for sulfur dioxide (especially damaging to health), nitrogen oxides, suspended aerosol particulates, carbon monoxide (Selden and Song 1994; Grossman and Kreuger 1995), heavy industrial emissions of arsenic, cadmium, lead, and nickel, and also biochemical oxygen demand and fecal coliform in water (Gawande et al. 2001). Varying "turning points" of income have been found in different studies for specific pollutants. Some have even found that some of these may "re-link" with rising incomes to exhibit "N-curve" patterns, possibly fecal coliform (Shafik. 1994) and sulfur dioxide in some countries (de Bruyn and Opschoor 1997).
The EKC pattern can arise due to high income elasticity for environmental quality that leads to political action (Beckerman 1992; Dasgupta et al. 2002). Higher income countries can fund pollution control activities (Magnani 2000) and also R&D in improved pollution control technologies (Komen et al. 2000).
However, some pollutants vary inversely with income, notably basic water pollutants that affect infant mortality (Dinda 2004). Others seem to increase without limit with national income, notably carbon dioxide, the major ingredient in global warming (Holtz-Eakin and Selden 1995). Others seeming to increase monotonically include solid municipal waste, traffic volumes, and general energy consumption (Holtz-Eakin and Selden 1995; Horvath 1997). (2)
For some such as deforestation there seems to be no relationship between environmental damage and national income across countries or even within countries (Koop and Tole 1999; Bhattarai and Hemmig 2001). Regarding endangered species, political and institutional factors seem more important than income levels, especially civil liberties (McPherson and Nieswiadomy 2001).
A general criticism is that most of these studies were done on cross-sections of countries rather than on more careful panels or time-series within specific countries, which can seriously alter the results (Stern et al. 1996; Stern and Common 2001). Geographical effects can vary across countries (Ezzati et al. 2001) as can enforcement effects, even within the United States across states (Selden et al. 1999), reflecting political and cultural factors (Magnani 2000), …