Hostname: page-component-848d4c4894-4hhp2 Total loading time: 0 Render date: 2024-05-14T23:55:04.031Z Has data issue: false hasContentIssue false
  • English
  • Français

Temporary prosperity or sustainable development: the long-run impact of developing pollution-intensive industries

Published online by Cambridge University Press:  12 October 2023

Hongyu Nian ,
Zhiwei Xu  and
Haitao Yin
Hongyu Nian
Affiliation:
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
Zhiwei Xu
Affiliation:
School of Economics, Fudan University, Shanghai, China
Haitao Yin*
Affiliation:
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
*
Corresponding author: Haitao Yin; Email: htyin@sjtu.edu.cn
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper proposes a dynamic model to capture the interaction among the environment, human capital accumulation, and economic growth. We emphasize the mechanism that pollution stock depresses human capital accumulation, which has received increasing support from empirical studies. The model predicts that the development of pollution-intensive industries can help an economy gear up a short-run prosperity, but it impairs the capability for long-run economic growth, trapping the economy at a low development level. The cost for a dirty economy to switch is expensive and even infeasible if the environmental degradation is irreversible. Policy interventions, such as tax on pollution and subsidy on human capital, can help alleviate but cannot eradicate the economic stagnation.

Keywords

Environmental pollutionEconomic growthHuman capital accumulationEnvironmental Kuznets Curve
Type
Articles
Information
Macroeconomic Dynamics , First View , pp. 1 - 28
Copyright
© The Author(s), 2023. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

†

Financial supports from the National Natural Science Foundation of China (No.72022011; 71974124; 72221001), Foundation on Modern Finance Research at Shanghai Jiao Tong University are greatly appreciated.

References

Ahmad, A., Zhao, Y., Shahbaz, M., Bano, S., Zhang, Z., Wang, S. and Liu, Y. (2016) Carbon emissions, energy consumption and economic growth: An aggregate and disaggregate analysis of the Indian economy. Energy Policy 96, 131–143.CrossRefGoogle Scholar
Andreoni, J. and Levinson, A. (2001) The simple analytics of the environmental Kuznets curve. Journal of Public Economics 80(2), 269–286.CrossRefGoogle Scholar
Archsmith, J., Heyes, A. and Saberian, S. (2018) Air quality and error quantity: Pollution and performance in a high-skilled, quality-focused occupation. Journal of the Association of Environmental and Resource Economists 5(4), 827–863.CrossRefGoogle Scholar
Arrow, K., Bolin, B., Costanza, R., Dasgupta, P., Folke, C., Holling, C. S., Jansson, B.-O., Levin, S., Mäler, K.-G., Perrings, C., Pimentel, D. (1995) Economic growth, carrying capacity, and the environment. Ecological Economics 15(2), 91–95.CrossRefGoogle Scholar
Beckerman, W. (1992) Economic growth and the environment: Whose growth? Whose environment? World Development 20(4), 481–496.CrossRefGoogle Scholar
Bharadwaj, P., Gibson, M., Zivin, J. G. and Neilson, C. (2017) Gray matters: Fetal pollution exposure and human capital formation. Journal of the Association of Environmental and Resource Economists 4(2), 505–542.CrossRefGoogle Scholar
Bosi, S. and Ragot, L. (2013) On the optimal control of pollution in a human capital growth model. Mathematical Economics Letters 1(1), 9–15.CrossRefGoogle Scholar
Bovenberg, A. L. and Smulders, S. (1995) Environmental quality and pollution-augmenting technological change in a two-sector endogenous growth model. Journal of Public Economics 57(3), 369–391.CrossRefGoogle Scholar
Brandt, L., Van Biesebroeck, J. and Zhang, Y. (2012) Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing. Journal of Development Economics 97(2), 339–351.CrossRefGoogle Scholar
Brock, W. A. and Taylor, M. S. (2010) The green Solow model. Journal of Economic Growth 15(2), 127–153.CrossRefGoogle Scholar
Byrne, M. M. (1997) Is growth a dirty word? Pollution, abatement and endogenous growth. Journal of Development Economics 54(2), 261–284.CrossRefGoogle Scholar
Cavalcanti, T., Mohaddes, K., Nian, H. and Yin, H. (2023) Air pollution and firm-level human capital, knowledge and innovation. CAMA Working Paper.CrossRefGoogle Scholar
Chang, T., Zivin, J. G., Gross, T. and Neidell, M. (2016) Particulate pollution and the productivity of pear packers. American Economic Journal: Economic Policy 8(3), 141–169.Google Scholar
Chen, Y., Ebenstein, A., Greenstone, M. and Li, H. (2013) Evidence on the impact of sustained exposure to air pollution on life expectancy from China’s Huai River policy. Proceedings of the National Academy of Sciences 110(32), 12936–12941.CrossRefGoogle ScholarPubMed
Chyi, Y.-L., Lai, Y.-M. and Liu, W.-H. (2012) Knowledge spillovers and firm performance in the high-technology industrial cluster. Research Policy 41(3), 556–564.CrossRefGoogle Scholar
Copeland, B. R. and Taylor, M. S. (2004) Trade, growth, and the environment. Journal of Economic Literature 42(1), 7–71.CrossRefGoogle Scholar
Criado, C. O., Valente, S., Stengos, T. (2011) Growth and pollution convergence: Theory and evidence. Journal of Environmental Economics and Management 62(2), 199–214.CrossRefGoogle Scholar
Currie, J., Hanushek, E. A., Kahn, E. M., Neidell, M. and Rivkin, S. G. (2009) Does pollution increase school absences? The Review of Economics and Statistics 91(4), 682–694.CrossRefGoogle Scholar
Dong, F. (2022) Aggregate implications of financial frictions for unemployment. Review of Economic Dynamics 48, 45–71.CrossRefGoogle Scholar
Dong, F., Wang, P. and Wen, Y. (2020) A search-based neoclassical model of capital reallocation. European Economic Review 128, 103515.CrossRefGoogle Scholar
Ebenstein, A., Lavy, V. and Roth, S. (2016) The long-run economic consequences of high-stakes examinations: Evidence from transitory variation in pollution. American Economic Journal: Applied Economics 8(4), 36–65.Google Scholar
Esteve, V. and Tamarit, C. (2012) Is there an environmental Kuznets curve for Spain? Fresh evidence from old data. Economic Modelling 29(6), 2696–2703.CrossRefGoogle Scholar
Figueroa, E. and Pasten, R. (2015) Beyond additive preferences: Economic behavior and the income pollution path. Resource and Energy Economics 41, 91–102.CrossRefGoogle Scholar
Fodha, M. and Zaghdoud, O. (2010) Economic growth and pollutant emissions in Tunisia: An empirical analysis of the environmental Kuznets curve. Energy Policy 38(2), 1150–1156.CrossRefGoogle Scholar
Fu, S., Viard, V. B. and Zhang, P. (2021) Air pollution and manufacturing firm productivity: Nationwide estimates for China. The Economic Journal 131(640), 3241–3273.CrossRefGoogle Scholar
Goulder, L. H. and Mathai, K. (2000) Optimal CO2 abatement in the presence of induced technological change. Journal of Environmental Economics and Management 39(1), 1–38.CrossRefGoogle Scholar
Gradus, R. and Smulders, S. (1993) The trade-off between environmental care and long-term growth pollution in three prototype growth models. Journal of Economics 58(1), 25–51.CrossRefGoogle Scholar
Grossman, G. M. and Krueger, A. B. (1991). Environmental impacts of a North American free trade agreement. NBER Working Paper.CrossRefGoogle Scholar
Hart, R. (2020) Growth, pollution, policy! European Economic Review 126, 103455.CrossRefGoogle Scholar
He, H., Huang, K. X. D. and Ning, L. (2021) Why do Americans spend so much more on health care than Europeans? International Economic Review 62(4), 1363–1399.CrossRefGoogle Scholar
Heft-Neal, S., Burney, J., Bendavid, E. and Burke, M. (2018) Robust relationship between air quality and infant mortality in Africa. Nature 559(7713), 254–258.CrossRefGoogle ScholarPubMed
High, S. (2017) Brownfield public history. In The Oxford Handbook of Public History, p. 423. Oxford: Oxford University Press.Google Scholar
Holtz-Eakin, D. and Selden, T. M. (1995) Stoking the fires? CO2 emissions and economic growth. Journal of Public Economics 57(1), 85–101.CrossRefGoogle Scholar
Hsieh, C.-T. and Klenow, P. J. (2009) Misallocation and manufacturing TFP in China and India. Quarterly Journal of Economics 124(4), 1403–1448.CrossRefGoogle Scholar
Ito, K. and Zhang, S. (2020) Willingness to pay for clean air: Evidence from air purifier markets in China. Journal of Political Economy 128(5), 1627–1672.CrossRefGoogle Scholar
Jalil, A. and Mahmud, S. F. (2009) Environment Kuznets curve for CO2 emissions: A cointegration analysis for China. Energy Policy 37(12), 5167–5172.CrossRefGoogle Scholar
Jans, J., Johansson, P. and Nilsson, J. P. (2018) Economic status, air quality, and child health: Evidence from inversion episodes. Journal of Health Economics 61, 220–232.CrossRefGoogle ScholarPubMed
Kambourov, G. and Manovskii, I. (2009) Occupational specificity of human capital. International Economic Review 50(1), 63–115.CrossRefGoogle Scholar
Klarl, T. (2016) Pollution externalities, endogenous health and the speed of convergence in an endogenous growth model. Journal of Macroeconomics 50, 98–113.CrossRefGoogle Scholar
Levinsohn, J. and Petrin, A. (2003) Estimating production functions using inputs to control for unobservables. The Review of Economic Studies 70(2), 317–341.CrossRefGoogle Scholar
Ligthart, J. E. and van der Ploeg, F. (1994) Pollution, the cost of public funds and endogenous growth. Economics Letters 46(4), 339–349.CrossRefGoogle Scholar
Lopez, R. E. and Yoon, S. W. (2014) “Sustainable” economic growth: The ominous potency of structural change. International Review of Environmental and Resource Economics 7(2), 179–203.CrossRefGoogle Scholar
Lucas, R. E. (1988) On the mechanics of economic development. Journal of Monetary Economics 22(1), 3–42.CrossRefGoogle Scholar
Panayotou, T., et al. (1993). Empirical tests and policy analysis of environmental degradation at different stages of economic development. Technical Report, International Labour Organization.Google Scholar
Pigou, A. C. (1932) The effect of reparations on the ratio of international interchange. The Economic Journal 42(168), 532–543.CrossRefGoogle Scholar
Power, M. C., Kioumourtzoglou, M.-A., Hart, J. E., Okereke, O. I., Laden, F. and Weisskopf, M. G. (2015) The relation between past exposure to fine particulate air pollution and prevalent anxiety: Observational cohort study. BMJ 350, h1111.CrossRefGoogle ScholarPubMed
Rebelo, S. (1991) Long-run policy analysis and long-run growth. Journal of Political Economy 99(3), 500–521.CrossRefGoogle Scholar
Romer, P. M. (1986) Increasing returns and long-run growth. Journal of Political Economy 94(5), 1002–1037.CrossRefGoogle Scholar
Romer, P. M. (1990) Endogenous technological change. Journal of Political Economy 98(5, Part 2), S71–S102.CrossRefGoogle Scholar
Smulders, S. (2006) Growth and environment: On U-curves without U-turns. In: Economic Modelling of Climate Change, pp. 9–23. Cheltenham: Edward Elgar.Google Scholar
Stern, D. I. (2017) The environmental Kuznets curve after 25 years. Journal of Bioeconomics 19(1), 7–28.CrossRefGoogle Scholar
Stern, D. I. (2004) The rise and fall of the environmental Kuznets curve. World Development 32(8), 1419–1439.CrossRefGoogle Scholar
Stokey, N. L. (1998) Are there limits to growth? International Economic Review 39(1), 1–31.CrossRefGoogle Scholar
Zivin, J. G. and Neidell, M. (2012) The impact of pollution on worker productivity. American Economic Review 102(7), 3652–3673.CrossRefGoogle ScholarPubMed
Zivin, J. G., Liu, T., Song, Y., Tang, Q. and Zhang, P. (2020) The unintended impacts of agricultural fires: Human capital in China. Journal of Development Economics 147, 102560.CrossRefGoogle Scholar