Neha Khanna

Measuring environmental quality: an index of pollution

Abstract This paper develops an index of pollution based on the epidemiological dose-response function associated with each pollutant, and the welfare losses due to exposure to pollution. The probability of damage is translated into welfare losses, which provides the common metric required for aggregation. Isopollution surfaces may then be used to compare environmental quality over time and space. An Air Pollution Index (API) is computed using 1997 data for the criteria pollutants under the Clean Air Act (CAA). The results are compared with the EPAs Pollutant Standards Index (PSI). Two significant differences emerge: unlike the PSI, the API facilitates a detailed ranking of regions by air quality and API values may contradict PSI results. Some regions with PSI values of 100–200 are considered less polluted under the proposed methodology than those with PSI values between 50 and 100. The key reason for the difference is that PSI values are determined entirely by the gas with the highest relative concentration whereas the API value is based on the ambient concentrations of all pollutants.

The income elasticity of non-point source air pollutants: revisiting the environmental Kuznets curve

This paper examines the income-pollution relationship for three non-point source pollutants in 1990. Ambient concentrations reported at monitors throughout the U.S. are regressed on median household income and other socio-economic variables for the census tracts in which the monitors were located. Contrary to earlier studies, a u-shaped relationship is obtained.

Preferences, Technology, and the Environment: Understanding the Environmental Kuznets Curve Hypothesis

We derive a simple expression for the income-pollution path using the standard static model of the environmental Kuznets curve (EKC). This expression makes it straightforward to identify the general characteristics of utility and pollution functions that lead to such a curve. We show that suitable preferences can always lead to an EKC while there is no technology that yields an EKC for all types of preferences, and we derive a sufficient condition for technology that leads to an EKC for almost all types of preferences. Our results hold for a model with multiple goods with different pollution intensities and for a production economy with nonconstant relative price of consumption and environmental effort. We derive our results without assuming specific functional forms and we encompass several other models as special cases.

Household Income and Pollution Implications for the Debate About the Environmental Kuznets Curve Hypothesis

Country-level analyses of global Environmental Kuznets Curve (EKC) relationships that use multicountry panel data sets are likely to suffer from several types of aggregation bias that may explain why previous studies have yielded conflicting results. The authors analyze 1990 cross-sectional data for the United States for three pollutants and test the general EKC relationship as well as the pure income effect. Their results suggest that the income level at which households reduce their exposure to pollution depends on the nature of the pollutant. They find consistent evidence for such a relationship for coarse particulate matter but little evidence for nonmonotonic relationships for carbon monoxide and ground-level ozone.

Assessing the Precision of Turning Point Estimates in Polynomial Regression Functions

Researchers often report point estimates of turning point(s) obtained in polynomial regression models but rarely assess the precision of these estimates. We discuss three methods to assess the precision of such turning point estimates. The first is the delta method that leads to a normal approximation of the distribution of the turning point estimator. The second method uses the exact distribution of the turning point estimator of quadratic regression functions. The third method relies on Markov chain Monte Carlo methods to provide a finite sample approximation of the exact distribution of the turning point estimator. We argue that the delta method may lead to misleading inference and that the other two methods are more reliable. We compare the three methods using two data sets from the environmental Kuznets curve literature, where the presence and location of a turning point in the income-pollution relationship is the focus of much empirical work.

Crying No Wolf: Why Economists Don't Worry about Climate Change, andShould

The economic literature on climate change implies that there is no urgent need for serious climate policy (Hamaide and Boland, 2000; Nordhaus et al., various; Chakravorty et al., 1997; Manne and Richels, 1992; Peck and Teisberg, 1994). In economic terms, it is not a significant problem. Furthermore, if the limited abatement recommended in these studies were to be achieved at least cost, it would be undertaken in low income countries. The results of economic models are only as credible as the assumptions upon which they are based. We identify a set of assumptions and characteristics that together define the standard for climate-economy models currently in use. The general apathy toward controlling the growth of CO 2 emissions, both at the global level and particularly in high income countries, is derived in part from conclusions based on these assumptions. In the following five sections, each of these assumptions are examined critically.

A note on ‘the simple analytics of the Environmental Kuznets Curve’

In a widely cited paper, Andreoni and Levinson (2001) argue that, under very mild restrictions on preferences, increasing returns to scale in pollution abatement are a sufficient condition for pollution to ultimately fall to zero with income growth. We show that the existence of an Environmental Kuznets Curve depends on the relative magnitudes of the returns to scale in abatement and in gross pollution, rather than on their absolute values. Increasing returns to scale in abatement by themselves are not sufficient for pollution to fall with income unless the returns to scale of abatement exceed the returns to the production of gross pollution. ∗ Corresponding author. We thank the journal editor and three anonymous reviewers for their comments on an earlier draft. All errors are ours. Summary Andreoni and Levinson (2001) argue that, under very mild restrictions on preferences, increasing returns to scale in pollution abatement are a sufficient condition for pollution to ultimately fall to zero with income growth. Their paper has received considerable attention in the environmental economics literature: as of April 2005, the Social Science Citation Index shows 17 publications that cite this paper. They suggest (p.284) that “simple explanations regarding the technology of production and abatement could be central to understanding the phenomenon” of the Environmental Kuznets Curve (EKC). We show that their result is driven by their particular choice of the functional relationship between consumption and gross pollution, and that abatement technology is much less important in a generalized model. The impact of the technology of production and abatement on the existence of an EKC is therefore likely to be smaller than suggested, and an increased focus on technology may not add as much to our understanding of the EKC as Andreoni and Levinson envisage. Andreoni and Levinson derive their main theorem under the assumption that consumption and gross pollution are directly proportional. However, even if the relationship between consumption and gross pollution is indeed linear, such a one-to-one correspondence depends on the units in which consumption and pollution are measured. It is also possible that the true relationship is non-linear. We extend Andreoni and Levinson’s model by permitting a general relationship between consumption and gross pollution. We show that increasing returns to scale in abatement by themselves are not sufficient for pollution to fall with income, and that the existence of an EKC depends on the relative magnitudes of the returns to scale in abatement and in gross pollution, rather than on their absolute values. Our analysis indicates that there is nothing special about increasing returns to scale in abatement, and that even under decreasing returns to scale in abatement, pollution will eventually decline to zero as income increases as long as the returns to scale in gross pollution are less than the returns to scale in abatement. Our result suggests that pollution reduction at source (generation) is just as important as end-of-pipe type abatement efforts, and that empirical evidence of increasing returns to scale in abatement does not imply anything about the income-pollution path.

Efficiency of Viable Groundwater Management Policies

We investigate the relative performance of simple groundwater policies in a spatially detailed aquifer and reveal the distribution of net benefits from those policies. Groundwater policy is plagued with a high level of complexity in achieving the first best outcome, which may be costly and politically infeasible to adopt. We parameterize a 8,457-cell spatially detailed model of the northwest Kansas section of the Ogallala Aquifer and find that simple pricing, quantity, and water market policies perform poorly but can be improved upon by localized policies that are more efficient and garner more popular support. (JEL Q15, Q25)

Guns and Oil: An Analysis of Conventional Weapons Trade in the Post-Cold War Era

This paper analyzes the global conventional weapons trade between 1989 and 1999. We postulate that a key reason for the huge transfer of weapons to the Persian Gulf region is the enormous value of the oil wealth there along with the dependence of Western economies on access to the relatively cheap and steady supply of crude oil. We find a strong, positive, and robust empirical association between arms trade and crude oil trade and explain it as the result of a target price band arrangement that was responsible for the remarkably stable crude oil prices during our study period. (JEL F10, F59, Q38)

Analyzing the economic cost of the Kyoto protocol

Abstract This paper examines the cost of meeting the Kyoto Protocol commitments under alternative assumptions regarding technology and technical change. Real GDP is modeled as a function of the capital, labor, and energy inputs. The analysis is based on data for 23 Annex 1 countries from 1965 to 1999. Two important results emerge. First, the standard assumption of Hicks neutral technical change and time and scale independent output elasticities is not supported by the data. Second, when technical change is allowed to be biased in favor of the energy and capital inputs, and when the output elasticities vary with the level of factor use and over time, the loss in real GDP due to the Kyoto commitments rises substantially. On average, the loss in real GDP is one and a half times higher than obtained under the standard assumptions.